How I Trade The 112s Baby Brother Strategy

Are you ready to explore a powerful trading strategy, the “112s Baby Brother Strategy,” designed to balance income generation with risk management in options trading? This strategy is a variation of the popular 112 trade, offering similar benefits but with a slightly different approach.

Understanding the 112s Baby Brother Strategy

The 112s Baby Brother Strategy is built upon the foundation of the 112 trade, which is a short put strategy with a hedge involved. The goal of this strategy is to generate consistent income from selling puts while also having downside protection in case of a market crash. It’s an excellent option for traders who want to balance income generation with risk management, especially those with smaller trading accounts.

Structure of the Strategy

At its core, the 112s Baby Brother Strategy involves selling a put option at a certain strike price, with the intention of profiting as long as the underlying stock remains above that level. Additionally, a put debit spread is created closer to the stock price to act as a hedge. This put debit spread consists of buying one put option and selling another put option at a higher strike price.

By combining these two components, traders can benefit from both the income generated by selling puts and the downside protection provided by the put debit spread. This dual approach helps mitigate losses during market downturns while still allowing for potential profits in upward or sideways market conditions.

Implementing the Strategy

To implement the strategy, traders typically follow a structured approach. This involves targeting options with approximately 90 days until expiration, selecting a suitable strike price for the short put, and establishing the parameters for profit-taking and risk management.

Traders aim for a profit target of around 75% of the initial premium collected from selling the put option, while also setting a stop-loss level at 400% of the premium. This ensures a balanced risk-reward ratio and helps maintain consistency in trading outcomes over time.

Additionally, traders have the option to convert the strategy into a hedge during periods of heightened market volatility. By closing out the short put position and leaving the put debit spread intact, traders can enhance their downside protection and minimize losses during market downturns.

Automating the 112s Baby Brother Strategy

For traders looking to streamline their trading process, automation can be a game-changer. With the advent of automated trading platforms, such as the one offered by our brokerage, implementing the strategy has never been easier.

By setting up an auto trader, traders can automate the execution of their trades based on predefined criteria, such as the selection of options contracts, profit targets, and risk parameters. This not only saves time and effort but also ensures consistent and disciplined trading practices.

Furthermore, automation allows traders to capitalize on market opportunities while minimizing emotional decision-making, leading to more objective and systematic trading outcomes.

Embracing the 112s Baby Brother Strategy

The 112s Baby Brother Strategy offers traders a versatile and effective approach to options trading. By combining the income potential of selling puts with the downside protection of a put debit spread, this strategy provides a balanced and reliable way to navigate various market conditions.

Whether you’re a seasoned trader or just starting out, incorporating the strategy into your trading arsenal can help you achieve your financial goals while managing risk effectively.

If you want to trade options profitably with a 86%+ win rate and consistently generate monthly income, then join the 10% Credit Spreads program!

Thanks for reading 🙂
Austin Bouley
CEO & Chief Strategy Officer