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Hi Davis. Could you explain how you would manage this trade? Are you just closing it if the far OTM puts are breached? Or before? Or do you roll them? Perhaps make a video if you haven't already?
Yes, I have trade it campaign style with futures. Probably the best trade but extremely risky. You need to look into your notional. The risk can go through the roof. You have to risk it for the biscuit :) good luck
Great content (as always). Love your channel!. To your point on the BP effect @ 11:08, I have constructed this trade with the addition of two long puts further down in price to define the risk and reduce the BP requirements. Worked well for my small account. For sure I lost some credit, but could still trade this at least!
I think this strategy is being used mainly on Futures. If one is not up to trading Futures, what would the best 'ETF's' be to use with this strategy. You did say that it was probably not suited for stocks due to the number and width of the strikes. Appreciate Davis.
Great video. I wouldn't trade this strategy due to risk on the downside. Is there a defined risk version of the 112 strategy? Could you be kind enough to cover this in the very near future?
Great video. I wouldn't trade this strategy due to risk on the downside. Is there a defined risk version of the 112 strategy? Could you be kind enough to cover this in the very near future?
Thanks for this, but given the capital intensity, it doesn't work for me. Seems to be a similar risk profile (with less capital) to the put broken wing butterfly.
hi davis its greate stuff as usual. I wouldn't trade this strategy due to risk on the downside. Is there a defined risk version of the 112 strategy? Could you be kind enough to cover this in the very near future?
Davis great content as ever. I've been trading something similar but without the risk of the two short puts. It starts life a single lumping put and the objective is to then add the short put as the price drops. This way your one short put can more than pay for the price of the long put. It's not new but I found it on another channel and he calls it the Ghetto spread. Would love to hear your thoughts. Works brilliantly with ETH and BTC options. I do both sides, calls and puts on the back of a BB squeeze.
when you talk about the chance to lose the trade, how you define "losing"? is that max lose is that some X of your profit? tx (we all now that 1 lost trade can mean portfolio wipe )
Great explanation Davis. Never heard of this strategy. When do you close this trade? (With 21 DTE left?) Or hold it longer? Also, do you roll any of the legs if you see the trade is starting to go against you? Risk management? Thanks Davis !
I am trying to figure out how to properly manage this trade. Option one: Would I close this trade at 21 days out or try and let it expire? Option two. if the market tanks. my debit spread would increase in value. I could sell it for a profit and then let my short puts become cash secured puts. Worst thing happening is getting stock at a huge discount. Does this sound like a feasible strategy?
If you don't mind owning the stock then you can manage the trade like you would a put ratio spread like this: ua-cam.com/video/yi97UwGVoYA/v-deo.htmlsi=JDOyXYTwxhBS8Rfc
You're welcome! You can place a stop loss if it works for you, but generally this is my take on stop loss on options: ua-cam.com/video/hUkBpo5P9X0/v-deo.htmlsi=Tpi3xnm7kMT-EvO7
Hi Davis, Thanks for showing us this strategy. I won’t be using it. The potential for a massive loss is just way too high. I think that if you have a negative stock bias, why not buy a put and fund it with a call credit spread?
Please can you suggest how to backtest on E mini S&P options (for non-us citizens) where buy and sell signals are generated from a third party software. Any guidance would be appreciable
95% win rate is rather meaninglessness, expectancy would be more useful. Honestly I don't know what the psychological effect of getting a rare huge loss is. Most of these strategies seem to pay peanuts and then on a black swan event you will get caught with your pants down and actually will have a decent drawdown if not a margin call in a single day...
So we have backtested it. It has worked great in the past 6-7 years. However, 30% drawdowns can happen rather often. I would say don’t use more than 30% of Buying Power for the account to sustain expansions
The only time to trade this is immediately after a high shock event and a pull back. If you have already had 10% pullback and the IV has gone way up then the 5 delta can be 25% OTM. Now you’re in a situation where there would have to be 35% pullback to be at risk (ie zero). At any other time the 5 delta is 10-15% OTM and that is way way way too exposed to a black swan.
Well, I picked the challenge to put my finances in order. Then I invested in cryptocurrency and stocks, through the assistance of my discretionary fund manager
This is a trade that works very well on the /ES futures at 120 DTE. For SPY or SPX you really need to have portfolio margin to get it to work really well.
Yep 120dte is perfect. More credit and less voma. Campaign style works great but again huge risk. Notional is through the roof with SPX and futures. If no one thought about it, look at your short strikes and multiply them by the number of contracts and then by 100 for SPX. (50 for ES etc.). That’s how much you will be down if underlying gets in the money not even accounting for volatility. Market breakers - sure but not overnight though. It is a great strategy just trade it with caution.
Get Your Copy of My Strategy Blueprints For FREE:
1) The Options Income Blueprint: optionswithdavis.com/blueprint/
2) The Credit Spreads Blueprint: optionswithdavis.com/cs-blueprint/
Ive been doing this trade for years. Works great on futures and more than 45 dte.
So if the stock goes up … u lose the put debit spread but u keep the difference of the low delta u sold ?? Is that right?
This works great in es futures or mini es, way better leverage and premium. Lower margin requirements. Keep short puts at a 6-7 delta
Hi Davis. Could you explain how you would manage this trade? Are you just closing it if the far OTM puts are breached? Or before? Or do you roll them? Perhaps make a video if you haven't already?
Yes, I have trade it campaign style with futures. Probably the best trade but extremely risky. You need to look into your notional. The risk can go through the roof. You have to risk it for the biscuit :) good luck
Great content (as always). Love your channel!. To your point on the BP effect @ 11:08, I have constructed this trade with the addition of two long puts further down in price to define the risk and reduce the BP requirements. Worked well for my small account. For sure I lost some credit, but could still trade this at least!
Thanks for the support ☺️
Can't wait to try out this strategy! Thanks again for another great video!
You're welcome :)
I think this strategy is being used mainly on Futures. If one is not up to trading Futures, what would the best 'ETF's' be to use with this strategy. You did say that it was probably not suited for stocks due to the number and width of the strikes. Appreciate Davis.
u explained so much better than a lot of other traders. And it's also good to hear someone using a familiar accent.
☺️
Hi, Davis , bug pleasure to see you in person
112 is a brilliant strategy.
Does the loss mean picking up the shares from the 2 short puts?
Great video. I wouldn't trade this strategy due to risk on the downside. Is there a defined risk version of the 112 strategy? Could you be kind enough to cover this in the very near future?
Great video. I wouldn't trade this strategy due to risk on the downside. Is there a defined risk version of the 112 strategy? Could you be kind enough to cover this in the very near future?
Thanks for this, but given the capital intensity, it doesn't work for me. Seems to be a similar risk profile (with less capital) to the put broken wing butterfly.
hi davis its greate stuff as usual. I wouldn't trade this strategy due to risk on the downside. Is there a defined risk version of the 112 strategy? Could you be kind enough to cover this in the very near future?
Davis great content as ever.
I've been trading something similar but without the risk of the two short puts.
It starts life a single lumping put and the objective is to then add the short put as the price drops. This way your one short put can more than pay for the price of the long put.
It's not new but I found it on another channel and he calls it the Ghetto spread. Would love to hear your thoughts.
Works brilliantly with ETH and BTC options.
I do both sides, calls and puts on the back of a BB squeeze.
No reply
... I warm to your strategy
If stock tests sold PUT Strike? it has unlimited loss on the downside
Never heard of the strategy but if it works for you, why not. There's always more than one way to profit from the markets.
Issue is margin requirement and it doesn’t work for short dte.
when you talk about the chance to lose the trade, how you define "losing"? is that max lose is that some X of your profit? tx (we all now that 1 lost trade can mean portfolio wipe )
Wanna know this as well, since you can always roll your naked puts if that's the case
Great explanation Davis. Never heard of this strategy. When do you close this trade? (With 21 DTE left?) Or hold it longer? Also, do you roll any of the legs if you see the trade is starting to go against you? Risk management? Thanks Davis !
You're welcome! I'd manage it similar to other undefined risk strategies: ua-cam.com/video/h7f3w4w1Uiw/v-deo.htmlsi=cg2cIJ72QNC_SNYr
Another great video
Appreciate the kind words!
Bro.. What are your top fav straties with less risk and mgt.
Do you need to have more cash for the two short way otm puts?
Your buying power requirement will increase for every additional short put you have on.
Hi Davis, just stumbled upon this and wonders what platform are you using options on? Is
I am trying to figure out how to properly manage this trade. Option one: Would I close this trade at 21 days out or try and let it expire? Option two. if the market tanks. my debit spread would increase in value. I could sell it for a profit and then let my short puts become cash secured puts. Worst thing happening is getting stock at a huge discount. Does this sound like a feasible strategy?
If you don't mind owning the stock then you can manage the trade like you would a put ratio spread like this: ua-cam.com/video/yi97UwGVoYA/v-deo.htmlsi=JDOyXYTwxhBS8Rfc
Thank you @@optionswithdavis
Davis, thanks for the content. Would it be ideal to place a stop-loss on the two short puts?
You're welcome! You can place a stop loss if it works for you, but generally this is my take on stop loss on options: ua-cam.com/video/hUkBpo5P9X0/v-deo.htmlsi=Tpi3xnm7kMT-EvO7
I don't understand how is this a naked option if your buying the puts?
No Need to adjust ?
Hi Davis, Thanks for showing us this strategy. I won’t be using it. The potential for a massive loss is just way too high. I think that if you have a negative stock bias, why not buy a put and fund it with a call credit spread?
If stock reaches call credit spreads, you book loss?
a staple strategy in my portfolio
Mr Davis. This should be done with /ES futures options and 60 DTE. I would not trade this with stocks..too risky
Please can you suggest how to backtest on E mini S&P options (for non-us citizens) where buy and sell signals are generated from a third party software. Any guidance would be appreciable
95% win rate is rather meaninglessness, expectancy would be more useful. Honestly I don't know what the psychological effect of getting a rare huge loss is. Most of these strategies seem to pay peanuts and then on a black swan event you will get caught with your pants down and actually will have a decent drawdown if not a margin call in a single day...
So we have backtested it. It has worked great in the past 6-7 years. However, 30% drawdowns can happen rather often. I would say don’t use more than 30% of Buying Power for the account to sustain expansions
The only time to trade this is immediately after a high shock event and a pull back. If you have already had 10% pullback and the IV has gone way up then the 5 delta can be 25% OTM. Now you’re in a situation where there would have to be 35% pullback to be at risk (ie zero). At any other time the 5 delta is 10-15% OTM and that is way way way too exposed to a black swan.
How do most of you guys still make profit? Even with the downturn of the economy and ever increasing life standards
Well, I picked the challenge to put my finances in order. Then I invested in cryptocurrency and stocks, through the assistance of my discretionary fund manager
Mrs Mary Gail Benner
Interesting, please how can I get more information? I don't want to remain out of ignorance
She's mostly on Telegram, using the username.
Benner10 👈
That's her username.
This strategy would have gone really with SMCI yesterday (April 19, 2024). ;-)
👍
Extremely risky trade if you don’t have huge amount to digest potential loss
Agreed. Recipe for disaster.
lol
yeah
a lot of “hoping”
once the trade is. placed
I dont like …”hope”
Since the correction are coming, better to show us covered call with protected put instead
This is a trade that works very well on the /ES futures at 120 DTE. For SPY or SPX you really need to have portfolio margin to get it to work really well.
@@sanbetski With higher prob, it's better to reach out to get more value.
@@sanbetski Annualized you can get between 20-30% --- IRA 15-25% due to the higher requirements.
Yep 120dte is perfect. More credit and less voma. Campaign style works great but again huge risk. Notional is through the roof with SPX and futures. If no one thought about it, look at your short strikes and multiply them by the number of contracts and then by 100 for SPX. (50 for ES etc.). That’s how much you will be down if underlying gets in the money not even accounting for volatility. Market breakers - sure but not overnight though. It is a great strategy just trade it with caution.
@SK-du4nq but you can always roll your puts, right? 😅
@@eMotionAllDamAge_ You could, but if your in a black swan event you wouldn't want the risk. Better to have a set stop in your plan and follow it.
7:19 oh wow! That profit graph 📉 looks amazing. It reminds me of an iron condor and a broken wing butterfly.