How to Trade the 112 Options Strategy (Like a Pro) is a video by Options with Davis that offers the Options Income Blueprint for free. This strategy has a high win rate and can be used in all market conditions. The video will explain what the 112 strategy is, whether it is worth trading, and how to trade it. In addition to this strategy, there are other videos available that may also be of interest to viewers, discussing different options trading strategies such as credit spreads, iron condors, and the wheel strategy. The content outlines the steps to trade the strategy, including choosing the closest expiration date, selecting appropriate deltas, and constructing the put debit spread.
So, if you’re interested in an options strategy with a very high win rate, the ability to make money in up or down markets, and can be used in all market conditions, then the 112 Options Strategy may be worth considering. The video by Options with Davis provides a comprehensive explanation of the strategy and how to trade it. Check out the content to gain insights into this profitable trading approach and explore other options trading strategies as well.
Overview of the 112 Options Strategy
The 112 Options Strategy is a unique and potentially profitable trading strategy that involves a combination of different put options. This article aims to provide a comprehensive understanding of the strategy, its benefits, risks, and suitability for different traders.
Definition of the 112 Options Strategy
The 112 Options Strategy is a premium selling strategy that consists of one long out-of-the-money put option, one short put option below the long put, and two short put options further out of the money. The additional short puts help finance a put debit spread. The strategy aims to achieve a high win rate and a high probability of profit.
Benefits of using the 112 Options Strategy
One of the main benefits of the 112 Options Strategy is its high win rate. With a win rate of above 95%, this strategy has the potential to be consistently profitable. Additionally, the strategy has short losing streaks, meaning that even if you do encounter losing trades, they are likely to be limited in duration. Another advantage of this strategy is that it has profit potential in both up and down markets, allowing traders to make money regardless of the market direction.
Risks of using the 112 Options Strategy
While the 112 Options Strategy offers many benefits, it also carries some risks. One of the main risks is increased risk due to multiple short puts. Having multiple short puts exposes traders to potential losses if the market moves against them. Another risk is the capital requirements involved. This strategy requires a certain amount of capital to finance the put debit spread, which may not be suitable for all traders based on their individual risk tolerance and available funds.
Suitability of the strategy for different traders
The 112 Options Strategy may not be suitable for all traders. It requires a good understanding of options trading and the ability to manage risk effectively. Additionally, traders should have sufficient capital available to finance the put debit spread. This strategy is best suited for traders who are comfortable with taking on some level of risk and have experience trading options.
Understanding the Components of the 112 Options Strategy
To fully comprehend the 112 Options Strategy, it is essential to understand its individual components. These components include a long out-of-the-money put option, a short put option below the long put, two short put options further out of the money, and financing the put debit spread.
Long out-of-the-money put option
The first component of the strategy is a long out-of-the-money put option. An out-of-the-money put option is one that has a strike price below the current market price. This component is included to gain exposure to potential downside moves in the underlying asset.
Short put option below the long put
The second component of the strategy is a short put option below the long put. This means selling a put option with a strike price that is lower than the strike price of the long put option. This short put option helps generate premium and offsets the cost of the long put.
Two short put options further out of the money
The third component of the strategy involves selling two short put options that are even further out of the money. These options have strike prices significantly below the current market price. By selling these options, traders can collect additional premium to finance the put debit spread.
Financing the put debit spread
The final component of the strategy is using the premium collected from the sale of the two short put options to finance a put debit spread. This involves buying a put option with a lower strike price and simultaneously selling a put option with an even lower strike price. This debit spread acts as a hedge and helps limit potential losses.
Advantages of the 112 Options Strategy
The 112 Options Strategy offers several advantages for traders who are willing to implement it effectively. One of the main advantages is its high win rate and probability of profit. With a win rate of above 95%, this strategy has the potential to be consistently profitable. Additionally, the strategy has short losing streaks, minimizing potential losses. Another advantage is the ability to make money in both up and down markets, providing traders with opportunities for profit regardless of market direction.
Disadvantages of the 112 Options Strategy
While the 112 Options Strategy has many advantages, it also has some disadvantages that traders should be aware of. One major disadvantage is the increased risk due to multiple short puts. Having multiple short puts exposes traders to potential losses if the market moves against them. Additionally, this strategy requires a certain level of capital to finance the put debit spread, making it less suitable for traders with limited funds.
Determining the Trade Setup
To effectively implement the 112 Options Strategy, traders need to consider several factors when determining the trade setup. These factors include choosing the closest expiration date, selecting appropriate deltas for the short puts, and constructing the put debit spread.
Choosing the closest expiration date
Traders should choose the closest expiration date for the options they are trading. This allows for a more focused trade and reduces the impact of time decay on the options’ value.
Selecting appropriate deltas for the short puts
Delta is a measure of an option’s sensitivity to changes in the price of the underlying asset. Traders should select appropriate deltas for the short puts based on their desired risk and reward profile. Going for lower deltas will increase the win rate but may lower the potential profits, while higher deltas may result in higher potential profits but also increase the risk.
Constructing the put debit spread
Constructing the put debit spread involves buying a put option with a lower strike price and simultaneously selling a put option with an even lower strike price. This creates a debit spread that helps limit potential losses and provides some downside protection.
Exploring Different Options Trading Strategies
In addition to the 112 Options Strategy, there are various other options trading strategies that traders can utilize. Some of these strategies include the two-wide debit spread and the put debit spread that is further out of the money. Traders can also adjust the strikes of these strategies based on their outlook for the underlying asset, whether it is bullish or bearish.
Tips for Executing the 112 Options Strategy
To effectively execute the 112 Options Strategy, traders should follow a few key tips. These tips include submitting the order as a single order ticket to ensure all components of the strategy are executed simultaneously. Traders should also focus on minimizing risk and maximizing profit by carefully managing their positions. It is important to avoid common mistakes, such as not properly assessing and managing the risk involved with the multiple short puts.
Reviewing the Video and Free Options Income Blueprint
Once traders have gained a good understanding of the 112 Options Strategy, they can refer to a video titled “How to Trade the 112 Options Strategy (Like a Pro)” by Options with Davis. This video provides a detailed explanation of the strategy, its benefits, and how to trade it effectively. Additionally, traders can access the Options Income Blueprint for free, which offers insights into other options strategies and helps traders generate a consistent income.
Conclusion
The 112 Options Strategy is a powerful trading strategy that offers a high win rate and the potential for profit in both up and down markets. However, it is important for traders to understand the risks involved, including increased risk due to multiple short puts and capital requirements. Traders should carefully determine the best trade setup by considering factors such as expiration dates, deltas, and constructing the put debit spread. By following the tips provided and learning from resources such as the video and free Options Income Blueprint, traders can enhance their understanding of the strategy and potentially improve their trading results.