Summary of "The Basics of the 1-1-1 trade!"

Finance-focused summary (strategy + performance + risk)

Performance / market comparison

• Account performance (strategy account shown)

  • Started year: $42,000
  • Current P&L: +$3,758 (+8.94%)
  • Timeline referenced: “over three months” → averaging ~3%/month
  • Implied projection: ~36% annual return
  • Management claim: strategy can make ~20%+ annually as a goal

• Benchmark: SPY (S&P 500 ETF)

  • Started year around $475
  • Quoted current level around $520–$524.7 (auto-subtitle variance)
  • Claimed SPY performance: about +9.5%
  • Claim: strategy is slightly behind in bull markets, but holds up in down markets

• Historical regime comparison (claims)

  • 2022: Market -20%, strategy +24%
  • 2023: Market +24%, strategy +20%

• Core “why it works” claim

  • In a down market, the strategy purportedly maintains gains (e.g., “if the market had been down 9%, I would still be up 9%”).

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Portfolio / risk framework described (Greeks / allocation)

The presenter frames portfolio direction and option income via Greeks and buying power:

• Delta

  • Example: Delta = 62 interpreted as having directional exposure “equivalent of 62 shares of SPY”
  • Meaning stated: bullish bias when positive

• Theta (income rate)

  • Example: Theta = 64 “theoretically should make $64/day”
  • Recent results cited: about $750 in a week
    • $750 / 7 ≈ $107/day (claimed outperformance vs theoretical)

• Buying power / collateral

  • Example: buying power $13,000 (stated as 28% of net liq)
  • Rule mentioned: can use up to 50% of buying power when conditions are met

• Conditions to allow more exposure

  • Price above the 200-day moving average
  • 10 exponential weekly moving average (EMA) above 20 (weekly trend filter)
  • When conditions satisfied, the strategy says it is “really under-allocated” while still executing

• Goal / recommendation tone (disclaimer-like statements included)

  • Target return: minimum 20% annual return
  • Speaker emphasis: “I don’t care what the market does… if I do 36% I’ve done well.”
  • “Fun money” warning:
    • Says not to use retirement money
    • Use ~10%
    • Consider matching/broad index investing otherwise

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The “1-1-1 trade” methodology (explicit structure)

Ticker / instrument context

• Primary trading instrument shown: ES = E-mini S&P 500 futures
• Also references micro-sized variant MES for smaller accounts
• Benchmark referenced: SPY

Trade composition (two variants: 1-1-1 and 1-1-2)

• “1-1-1” (primary focus)

  • 1 out-of-the-money put debit spread (“put debit spread”)
  • 1 out-of-the-money naked put (sold)
  • Both are out-of-the-money; the naked put provides premium, and the debit spread provides downside “insurance” / shape.

• “1-1-2” variant

  • 1 put debit spread
  • 2 out-of-the-money naked puts
  • Mentions an ideal 1:1 ratio of naked puts to put debit spreads

Key parameter choices

• Expiration / DTE

  • Prefer selling ~120 days out (around four months)
  • Example used: around 126 DTE

• Put selection by Delta

  • Sell a 10 Delta put
  • Presenter equates “10 Delta” with roughly 10% probability of expiring in-the-money
  • Stated objective: about 90% probability of staying out-of-the-money

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Example trade details (numbers provided)

• Underlying reference

  • Underlying ES price shown around ~5335

• Put strike chosen

  • Strike: 4700, described as “10 Delta” (for naked put component)

• Naked put (example)

  • Premium received: $1,538
  • Profit probability claimed: 92% probability of profit
  • Theta cited: $20.59/day
  • Break-even mentioned:
    • Theoretical break-even around ~4675 (subtitle approximation)
  • “Max profit”:
    • $1,537–$1,538 (premium amount; stays similar if price rises)
  • “Max loss”:
    • Theoretical tail risk if ES goes to zero
    • Presenter’s broker collateral belief: max loss roughly tied to ~$9,400 collateral
  • P&L behavior explained:
    • Profit fairly stable if price rises and time passes (theta decay)
    • Early losses possible if price drops quickly, but can recover by expiration as time decay resumes

• Put debit spread (“insurance”) example

  • Bought option described as “25% probability ITM”
  • Sold the other leg 50 points below the bought strike
  • Combined payoff described as a “whale-shaped” hump:
    • Helps when price drops
    • Aims to maintain profit characteristics while extending downside break-even

• Combined break-even / risk after adding spread

  • Downside break-even stated around ~4620–4628

• Claimed outcome characteristics

  • Described as:
    • A “bearish trade” that “phenomenally well” in bullish environments
    • Generates premium/income if price expires inside the favorable range (premium-based outcome, phrased as making the premium “regardless of how far the market goes up”)

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How trades are layered and repeated

• Execution cadence

  • Do one trade every week

• Scaling via “tranche size”

  • If tranche size = 2 → do 2-2-2
  • If tranche size = 3 → do 3-3-3

• Portfolio stacking

  • Aim to have ~15 of these trades on
  • “Rent and repeat”:
    • After closing naked put for profit, open a new one to keep the stack maintained

• Management timeline

  • Naked puts started around 120 days
  • Closed around when DTE reaches 30 to 21 days (avoid “gamma risk” in the last ~21 days)

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Risk management rules / cautions (step-like)

Naked put management

• Close naked puts when

  • They reach ~95% profit, OR
  • Remaining time is ~30 to 21 days (avoid gamma risk)

• Loss control / allowed stop

  • Close at a loss equal to 2x the initial credit received
    • Example logic: sold for $1, if it costs $3 to buy back → $2 loss = 2x
  • Example cited: close if losses become very large (broker/capital constraints discussed)

• “30 Delta breach” rule

  • If the sold put’s delta rises to ~30 Delta or higher (implying much higher probability of finishing ITM):
    • either close and accept loss, or
    • mark as “Problem Child” and manage with monitoring

Roll / extend-duration procedure (explicit steps)

When the naked put goes against the position too quickly:

1. Close the losing naked put (example described)
2. Roll out in time (extend duration)
   • Close and reopen when it becomes “worse” (e.g., from ~10 Delta to ~30 Delta)
   • Open a new put in a farther expiration (example moves by ~30-day increments)
3. Ensure credits cover debits
   • Rolling is emphasized as “collects an additional credit,” aiming for credits received ≥ debits paid over the sequence
4. Continue rolling if the market keeps moving against
   • Example mentions rolling to expirations in a multi-year sequence (e.g., 205, 330, 449, 540 days)
5. Critical constraint
   • Rolling requires available buying power/cash
   • Presenter warns you can’t “sell unlimited notional”
   • Temporary losses may occur, so collateral must remain on the sidelines

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Disclosures / cautions included in subtitles

• Advises against using retirement money; describes strategy as “fun money”
• Suggests:
  • Use about 10% of retirement money
  • If matching exists, do employer match / broad index investing (mentions VOO? / “bo” unclear, and SPY as a hold-and-forget S&P 500 idea)
  • Add bonds later in retirement (general personal finance guidance)
• No explicit “not financial advice” phrase was observed in the provided subtitles, but there is explicit caution about not using retirement funds.

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Tickers / instruments mentioned

• SPY — S&P 500 ETF benchmark
• ES — E-mini S&P 500 futures (main trading instrument shown)
• MES — micro E-mini S&P 500 futures (alternative for smaller accounts)
• No other specific equities/ETFs/bonds/commodities were explicitly named.

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Key numbers explicitly cited

• Account:

  • $42,000 starting
  • +$3,758 (+8.94%) YTD
  • ~3%/month
  • Projected ~36% annual

• SPY levels:

  • ~$475 start
  • ~$520–$524.7 current
  • Claimed ~+9.5%

• Greeks example:

  • Delta 62, Theta 64
  • ~$750 in a week → ~$107/day

• Buying power / exposure:

  • Buying power $13,000 (28% of net liq)
  • Exposure limit stated as up to 50% (under trend filters)

• Trade example:

  • ES around ~5335
  • Naked put strike 4700 (10 Delta)
  • Premium received $1,538
  • Profit probability claimed 92%
  • Daily theta $20.59/day
  • Break-even examples shown: ~4675 (naked put) and ~4620–4628 (combined)

• Management:

  • Close at 95% profit or when DTE reaches 30–21 days
  • Loss threshold: 2x initial credit
  • Roll examples include deltas 10 Delta → 30 Delta and moving to expirations in ~30-day steps

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Presenters / sources

• Presenter: Bobby (referenced multiple times)
• Mentioned class/program name: “University of West Georgia class”
• A Zoom link for live trading is referenced, but no external publication/source is named.

Category

Finance

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