This Options Strategy Can Deliver 60% Returns - Here's Why

[00:02] 60% return on the buying power that I'm using. It works in all trading bearish or neutral. >> Today we will talk about an undefined >> Today we will talk about an undefined risk options strategy. My guest has had

[00:17] risk options strategy. My guest has had great success the last years trading one great success the last years trading one from London in UK. Welcome Suhib Muhammad John. Thanks for having me. So, give us

[00:30] a very brief summary of your strategy and the results you have achieved. >> The strategy is called the 111 trading strategy which is an undefined options trading strategy which is open for a credit. It works in all trading

[00:44] environments. So whether you're bullish, bearish or neutral, uh it works in all scenarios, but it works the best when you've got a directional assumption. As the name suggests, it consists of three legs of which two of those legs is an

[00:58] out the money debit spread which is then financed by a further out the money uh short short option. So the debit spread acts as a hedge if the trade goes against you. So it allows you to widen your break even and even allows you to

[01:13] make a more potential profit uh than the initial credit you received. And in terms of returns, you know, it's averaging around 30% a year on my overall trading account. >> Some of us are a little bit worried when

[01:28] we hear undefied risk, but we will get back to that later in the interview. But yourself, Swim. >> I've been trading for about 10 years of which six of those years is trading options. So, I started as a forex trader

[01:44] where I was profitable, but I wasn't beating the buy and hold S&P strategy where one of the main things I found out about myself quite early on in my trading career was I really don't like losing. And I considered myself as a

[01:58] technical Forex trader, but I could do all the technical analysis in the world, but the odds on making money in my view, especially in Forex, was roughly a especially in Forex, was roughly a 50/50. I came across a YouTube video of

[02:11] someone talking about selling put options of selling them at a 20 delta where you can make money if the stock went up, down or sideways and had an 80% chance probability of profit. So, I was instantly hooked and I read and watched

[02:27] as many videos as I could. And then about a week later, I opened a brokerage account, did my first put option on Apple, 7 days out till expiration, your standard 20 delta, and the stock actually went down, but it stayed above

[02:40] my put strike and expired worthless, and I made $50. Ever since then, the rest is options trading ever since. And fast forward to today, as you mentioned earlier, 99% of my trades are undefined

[02:55] risk. And we'll go through on how I make make those less risky for those who find undefined trades quite risky. And my go-to strategies are your standard naked puts, naked calls, strangles, and the 111 strategy, which we'll go into more

[03:09] 111 strategy, which we'll go into more detail today. The reason why I trade undefined risk is the flexibility in managing positions that go wrong. Now we all can sell 20 delta puts and if the stock goes up that's great and that

[03:24] happens majority of the time but in the five 10% where your put strike for example goes in the money what sets I think me as a good trader versus a mediocre trader is the ability to navigate your way through that kind

[03:38] of losing position and how we can eventually close those position for break even or a profit using undefined risk. How popular is options trading in England?

[03:50] honest. It wasn't as popular as in the US and other parts of Europe. I think one of the challenges is that we don't have many brokers to choose from. Like you've got your standard Robin Hood, Weeble, etc. and Mumu that are widely

[04:05] available in in the US and other parts of the world. Whereas I use Interactive you've got things like Tasty Trade which has just started. Robin Hood have just launched in the UK but without auctions. So more and more choices becoming

[04:19] So more and more choices becoming available and therefore that allows UK traders more flexibility and more ways or lower the barrier of entry into trading options. >> Okay. So let's go into the one one

[04:33] trade. Can you describe a bit more in detail how you set up a 111 trade? As I mentioned earlier, it is a three-legged strategy which consists of an out the money debit spread which is then financed by selling a further out the

[04:48] best way to show this is with an example of a trade that I've just placed today which is actually up 25% funny enough will give your audience a bit more context in terms of how this trade is

[05:03] constructed. So this is the 111 trading strategy inside a nutshell. So the way it works is is you can see here I did this on Micro Strategy. I've done this today and again like I said it's up $140 or 25% of the initial credit which is

[05:19] obviously good to see in terms of the expiration. I'll go into why I've selected January the 16th which is 46 days out when we go into the the nitty-gritty. And in terms of the strikes, what we do here is is we've got

[05:33] strikes, what we do here is is we've got the the long put option of 145 and the short put option of 140. That is your debit spread. And what I'll do first is actually just exclude the finance put. So you can kind of see what's going on

[05:48] here. So you can see a debit spread as the name suggests is that you will open the trade as a debit. And you can see here we profit for Micro Strategy which is currently trading at 171 which is this line here of Micro Strategy going

[06:02] this line here of Micro Strategy going down. Now in this example of the 111 strategy I want Micro Strategy to go up. So overall I've done a put 111 which therefore what we want to do is Micro Strategy to go up. But this debit spread

[06:18] before that if things go start going wrong, we start making money on our debit spread which widens our break even. So if I bring back the 130 put,

[06:31] you can see now this is the whole construction of the trade. So if we go through the kind of metrics or the KPIs, you can see here that this which was a debit spread of I think it was like a couple hundred dollars. We now have sold

[06:44] the 130 put which has not only financed the cost of that debit spread but and then some to open the trade for an initial credit of $557.50.

[06:56] Now because this is undefined as you can see if we go past that one a 130 put strike or a break even of 119 we will start to lose money on this trade. So the max loss is micro strategy obviously going to zero very very unlikely. And

[07:11] you can see here which we'll go into at the end is that our max profit is actually greater than the initial credit. So I'll talk about that last and you can see here the probability of profit is 89%. And one of your questions

[07:23] you mentioned earlier about the scariness, if that's even a term, of undefined risk where I'm placing trades that are, you know, 85% plus probability of profit. And I'll show you in the mechanics of how I

[07:38] how I manage this trade to make those percentages even higher. Now, you also got to look at this as well that I've got a 30% break even. So Micro Strategy needs to move down 30% for me to even start losing money on this trade at the

[07:53] date of expiration and the unrealized gain because this trade is live. We're already up 25% and that's because Micro Strategy has moved up. So when we look at it on the upside, which is I want Micro Strategy to go up, I've got no

[08:07] Micro Strategy to go up, I've got no risk to the upside on this trade. And if Micro Strategy closes above our debit spread uh long put strike of 145, we will collect the initial credit that we received very similar to a standard put

[08:21] option that we are generating the credit that we receive if it stays above our put strike. Now the beauty of this strategy is that if the price starts to go against us, what happens is this debit spread as we showed when we

[08:36] excluded the 130 put starts to make money. And what that does is as time goes on and as Micro Strategy continues to go down and ends up somewhere in what's called the kind of trap area, which is basically our debit spread, we

[08:50] can actually make more money than the initial credit we receive. And you can just over $1,000. >> And that's calculated by the net credit

[09:02] plus the width of the strike. So in this case it's $5 plus 55750 gives you that 105750 overall profit. So I don't really look at it in terms of yes I can make a potential of 157. This debit spread for

[09:17] me is again just to widen out that break even. So all of this is all that additional break even that allows me to get a two 3% additional break even to the current price of where Micro Strategy is currently trading. And

[09:30] that's the kind of makeup of the 111 strategy. strategy. >> So to sum up, you want it to end in this >> So to sum up, you want it to end in this long flat line with the initial credit.

[09:43] >> Yeah. So yeah, in this long line, yes. So ideally we want it to stay above 145 in particular before the day of expiration but as we'll go on to and expiration but as we'll go on to and manage this way before the 40 46 days

[09:56] which again increases your probability of profit and takes risk off the table quite early. >> So let's get into the mechanics. I think >> So let's get into the mechanics. I think we can start with which underlyings you

[10:08] choose and why. I'm kind of agnostic in terms of underlyings or or or direction. Basically, meaning I will trade anything that has liquidity and I've got a very

[10:20] particular set of rules that I use. Back in the day, I used to do this manually watch lists and all these kind of good stuff. But I've been playing around over the last couple of years with option scanners. And I found that Option

[10:35] Samurai is the best option screener or scanner out there that I've come across scanner out there that I've come across because it's got so much custom features in there that it's probably one for another video. But it saves me about

[10:49] hours of work in a week to go find opportunities with just a click of a button. I've got it set up in my nice way like I need to do it. So, just to quickly walk you through what those are. The first one is it, like I mentioned,

[11:01] options volume. And again, I you kind of use anything that that where the volume's over 5,000 contracts traded in any given day. And then the next one is implied volatility or high IV rank, which basically measures a stock's

[11:17] which basically measures a stock's current IV versus the IV over the last year and kind of ranks it between zero to 100. So, I kind of like to set that better, which basically means there's

[11:30] more volatile markets, therefore options premium are more juicy and therefore you can tend to get wider out the money to make the same amount of credit. In terms of the short put strike, so in the micro strategy example where we finance with a

[11:43] strategy example where we finance with a $130 put, I really want that at minimum 20% below or above if you're doing it on the call side, the current price. So again, trying to give myself the biggest break even as I can while generating

[11:57] enough credit. And speaking of credit, I've kind of settled with a sweet spot of trying to get $2 per contract of initial credit for every contract that I do. So $200 per per contract. And as an

[12:12] added bonus which I've kind of added in over the last six months or so is if the RSI is overbought or oversold on the daily time frame that is also an added example in the example we were looking at it's it's oversold. It's under 30 on

[12:30] the RSI on the daily and on the weekly, which says to me that it's more than likely that Micro Strategy will either flatline or go sideways or potentially have a little bit of a pop up, which may be enough to hit my take-profit targets

[12:46] and close out of the trade. So, it's not a necessity, but it's better that if it does have that as well. >> You you said that you wanted to be at least 20% away with your strikes. Can you be a bit more specific? What does

[12:59] this translate into deltas for instance both for the debit spread and for the short that you're selling? >> Yeah. So my kind of opening trade when underlying that I'm quite interested in looking at I will place a a 111 as with

[13:16] kind of set delta criteria. So for the long option the one that is out out the money the first part of the debit spread I generally start around the 30 delta out the money. and the width of the spread. So in the micro strategy

[13:30] example, it's $5. That really depends on the price of the stock. So anywhere up the price of the stock. So anywhere up to, you know,$1red to $150 is roughly to, you know,$1red to $150 is roughly about, you know, a $5 spread. Anything

[13:43] $200 plus, especially when you go out into the monthly expirations, the the widths of the strike are generally a minimum of $10. So my sweet spot is between five and $10 the width of that debit spread. And then when it comes to

[13:56] the short the short leg i.e. the one that finances it. So in micro strategy that finances it. So in micro strategy cases that 130 short put I generally need to find a balance between delta and how much premium I want to receive. So I

[14:09] always put the short short leg at the 20 delta initially and then I'll raise it or lower it depending on if it's enough premium or I've got too much premium at the 20. Especially when volatility is quite high. I can go further further

[14:23] down to like a 15 delta and still pick up more than $2 credit per contract. >> And and you plan this trade out in a tool like Option Strat or Samurai before you actually execute, I guess. >> Yeah. Yeah, that's correct. So, Option

[14:38] Samurai does have an inbuild similar to Option Strat, but I generally use Option Strat to build out the trade and then I use Option Samurai to find me an underline that hits my criteria and then play around in Option Strat till I get

[14:51] the right amount of premium and break evens, etc. And then I'll place that on Interactive Brokers, which is my broker of choice. and 45 DTE as you had in your of choice. and 45 DTE as you had in your example trade is the typical DTE that

[15:06] >> Yes. So I generally place 111 trades or any trade to be to be honest really 45 any trade to be to be honest really 45 to 60 days out and I always use the monthly expiration cycles and the reason for that is the monthly cycles have the

[15:20] best liquidity and volume in there. So you get really tight bid in our spreads. So that is what I that is what I generally use. So in this example where for micro strategy that I placed today, January the 16th is the January monthly

[15:34] January the 16th is the January monthly cycle and it's 46 days away. So I February because it was too far out and I definitely wouldn't have done December 19th which is December's which is less than 21 days away. So January was the

[15:47] right option date to expiration to be using for this particular trade. using for this particular trade. So you have placed your trade and we have gone through your mechanics for doing that. When do you close it? When

[16:01] do you take profit and when will you take a loss? The bread and butter of take a loss? The bread and butter of this is I will take profit at 50% of the initial credit that I receive. So in the micro strategy example where we

[16:16] collected around $550, it will be 50% of that number. And if that doesn't happen, my main point of whether to take action is at 21 days to expiration. The reason

[16:29] why is 21 days to expiration because that's the sweet spot before the increase in gamma starts to ramp up, which if my trade goes against me, then I could it could be a lot harder to roll the position. So at if I between when I

[16:43] open till 21 DTE, if I get to 50%, I'll close. at 21 DTE if I am in any type of close. at 21 DTE if I am in any type of profit like 5% 10% 20% etc I will either

[16:55] close out the trade and move on to another trade or if the underlying still another trade or if the underlying still hits my criteria of high IV rank RSI option volume etc etc I may look to roll that position out into the next cycle

[17:09] that position out into the next cycle but let's say for example that at 21 DTE the trade has gone against me and I'm losing money on the trade what I will do I will close that position out or roll that position out rather by closing out

[17:23] the current 111 and reestablishing a new 111 trade and widen out my strikes and my break even and typically do that for a credit sometimes with a with a small debit. Now your question around when do I accept a loss?

[17:40] mentioned earlier. So, I don't accept the loss. And what I mean by that is in the micro strategy example, if this trade went against me at 21 DTE, I was $400 down on the trade. Yes, I would close the trade and I would have a

[17:56] realized P&L loss on my books, but I'm selling to open a brand new position, which the credit that I receive will cover that loss that I've made. So yes,

[18:09] because the trade is still open or that campaign is still open, I will continue to roll that position at 21 DTE or when the trade becomes profitable either at a

[18:21] break even or a profit. I rarely or I haven't done it in years to be honest. I haven't really closed a position out and not traded that underlying anymore for a loss. So you are a master of rolling and what

[18:35] rolling >> in terms of 111 on average it's it's 1.1 generally most of the time it closes out for a to my 50% profit target. So I use

[18:50] the similar concept outside of the 111 where I do strangles and puts and calls etc. So I do have a Tesla strandle on at the moment which I've been rolling for best part of two years and every single roll that I've done I've done it for a

[19:04] credit. So when Tesla started to rock it up the price went against me and and then I just had to continue rolling up and out up and out up and out while using the put to generate enough credit to roll that call up for an overall

[19:18] credit inside the trade. So maybe it's one for another video that I can walk through that that that master of a trade. But my point being is that with undefined risk, you can always manage that position and improve your strikes

[19:31] every single cycle. As long as I know how much credit I received in the overall trade and if I can close it for less than that amount, I will close the overall campaign, in this case Tesla, for an overall profit.

[19:45] So let's dig a bit deeper into your rolling and your management. And we do have a different example trade, don't we? In that you had in Adobora. Let's

[19:57] bring in this. This is the original trade, isn't it? classic example of what we're talking about of when a trade goes against you. You can see at the top here that this screenshot was taken on last Friday,

[20:12] screenshot was taken on last Friday, which was 21 DTE for the December 19th. As you can see, that's where the day of expiration and we're around the 21 DTE mark. You can see here that the trade is down best part of $300 as you can see

[20:24] inside the top leftand corner. And you can see here that I've got the debit spread. I've got the three 335 and the 330 debit spread. So a $5 wide debit spread which was financed by the 320 put. And you can see here by the dashed

[20:37] line or where Adobee is trading at this point in time at $31,955 that the current price is sitting at the latter end of the trap. So it's kind of well known and you can see that even though it's sitting in the trap, which

[20:51] you know my break even is 4.7%. So I've still got cushion to the downside, part still got cushion to the downside, part of my rules is that 21 DTE, if I don't the position. And again because I don't

[21:04] want to risk it going further down and that gamma spike started to happen and therefore the delta's changed really rapidly below 21 days. So what I've done I think is to to kind of show you all show your audience is kind of four

[21:18] position and then because I've already done the role now I can tell you or your audience can guess as we go through the options on which one I actually did. So scenarios now. >> Okay. So we will see the four different

[21:32] ways you could consider managing this situation because by your rules now you have to roll it or manage it somehow because you are 21 DTE and it is at a

[21:44] bit uncomfortable position. So here is the first alternative that you have alternative. >> Yeah so what this is is basically closing out the current 111. As you can see it's kind of grayed out here. So

[21:59] I've bought back the sold the debit spread and bought back the put and I've reopened the same position or the same legs. So same 111 trade but down and out further in time. So the first thing to notice is that the date of expiration of

[22:13] the roll has now moved out to the January 16th cycle. As part of my rules, I like to roll into the next monthly cycle. And you can see here that I've kept the same width of the debit spread. So it's still a $5 wide spread at the

[22:26] 320 315. And again, I've managed to move my put out down to the 305 put. Now, the key things to realize here is that the main thing is that the break even, so I think in the other slide, I think it was like 4 point something odd

[22:41] percent where now our break evens has has risen up to 8.4%. And that's because we've got a new debit spread and we've rolled that short put out out in time and down in strike. And now you can see the kind of tail bit where initially it

[22:55] was the best part of $1,000. I can still make $715 in this trade if it falls outside of the trap, but with a potential to make up to $1,200 if it

[23:07] falls within the trap. The current price of Adobe was in the back end of the trap. Now you can see we've moved it now pretty much to the front of the new trap that we've created, giving us that wider break even and still getting to a strong

[23:21] profit potential. And I would manage this exactly the same way. So in this this exactly the same way. So in this example, I can make $715 a profit. I'll manage that at 50%. So if it makes $350 odd dollars, I will close out of the

[23:35] trade. Or I will manage again at 21 DTE. See where the positions at and again roll accordingly where I need to do. And that's for all the options. I would manage it in the exact same way. >> What are the pros and cons of this way

[23:48] >> What are the pros and cons of this way of managing your trade? So the pro is is of managing your trade? So the pro is is that in terms of risk, you are reducing your overall risk because what you've got here is you're actually putting your

[24:02] margin or buying power relief, you will get some of that in this trade. The disadvantage is is because you're still buying a debit trade or you're still buying a debit spread, you can't move your put strike further down because it

[24:17] needs to be high enough to pay for that debit spread. So that's the con of it is that you are still not capturing the full premium of that short put because you have to finance that overall debit spread. Okay. So, let's move to the

[24:32] second way of managing this position and that is closing the debit spread and that is closing the debit spread and roll the naked put. Please explain. Yep. So, in this example, we are closing out the fivepoint debit spread. The

[24:45] fivepoint debit spread is about $2 up in profit. So, we're going to close that for a PL gain. And what that does then is allows you to use that $2 or your is allows you to use that $2 or your profit to help push out the naked put

[24:59] option down and out in time. So in this example, we're basically turning this example, we're basically turning this from a 111 trade into a naked put or a short put position where we've just got one option and we've closed out two of

[25:11] the 111 legs. Now what this creates is again your standard standard short put again your standard standard short put where the max profit is at 700 and and a bit small there, $786 where if it stays above the 300 strike and also the break

[25:27] even is roughly around the same but what it does do compared to the other slide it pushes that break even or the short put further out in time. So if we do get that strong pop up whereas before in option one we had to pay for that debit

[25:41] spread which is now working against us. We don't have that anymore and therefore the short put will drain value a lot quicker and therefore the ability to get out of the trade. And the other con you could say of this is we don't have that

[25:54] trap. So we don't have the ability to make more than the initial credit that $700 or dollars. >> Okay. So let's move to the third way to manage this trade. So what this one is

[26:08] manage this trade. So what this one is is that we again we close just the long is that we again we close just the long leg of or the long put in this example first and we roll out the two the two short puts. Now what this does is your

[26:23] long leg is big in profit, right? Because you obviously want the stock to go down. So the long leg is going to gain value. So therefore, we sell that for a big profit. Similar to option two, we use that profit to then roll the two

[26:39] naked options down and out. Now, this does add a bit more risk to the trade because now we've got two naked options as opposed to one naked option. But what it does do, similar to option two, it gives us more credit to play with when

[26:54] we roll because we don't have to buy that long leg and therefore we can push that long leg and therefore we can push this out out in time uh for a lot more of a break even. So you can see now the break even on this trade is actually 12%

[27:07] where the other one was around 8% from memory and yet our max profit is greater than option two which again if we're trying to manage at 20% 10% break even

[27:19] the stock doesn't need to move that far up for both of these short puts making us money. So you are taking on a bit more risk. You will have more buying power margin that you'll be using up to to place this trade. But if you've got

[27:32] it, it's an option that you can do to get a wider break even than the other two options that we've looked at. >> And then we even have a fourth option for how to manage this trade. >> Yep. So this one is very similar to

[27:46] option one where we close out the whole position and we reestablish a brand new position down and out. But what the difference with this option is we are utilizing a lot of that premium that we collected initially and the premium that

[28:00] we collect for rolling this option in pushing your strikes way way way out the money where you can see here that your break even is at 17%. The downside to this doing this is obviously now your maximum profit is is a lot lower and the

[28:17] tail you're only making $58 if the option expires worthless. So it just shows the reason why it's again it's not it's not the option I've chosen but it worried about this position instead of closing it out for a $350 odd dollar

[28:34] loss, you can do this instead to widen out those break evens and then also give you the opportunity potentially to go make more money on the max profit side, but also widen that break even as far as you possibly can. And that's what

[28:48] undefined risk gives you is the ability to be more flexible when trades go wrong. >> Okay. So now we have been through four alternatives ways to manage this trade and this was a real trade. You were had

[29:03] to manage this a couple of days ago before we did this recording and these were the four ways you were considering. So now I'm very curious which of these four alternatives did you actually choose and why? So, I went with option

[29:18] two, which was closing out that debit spread for a profit and rolling that naked put. And the reason why I've done that is I felt it gave me the best risk that is I felt it gave me the best risk risk-to-re.

[29:36] and I pretty much doubled my break even where the initial trade where I was sitting at 4% break even now put it up to 8.6% 6% break even which again pretty much double the amount of of where we were previously. Yes, that I've taken a

[29:52] little bit more risk in terms of doing that. But what it does do, it gives me that peace of mind of having that stronger break even with the amount of premium that I can actually collect inside this trade. And you know, looking

[30:04] at the trade now is the trade is slightly up in terms of the new option a long way to go to recoup it losses that it's currently got, but over time, I'm quite confident that I'll be able to get out of this trade at minimum with a

[30:18] very small profit. But this is still an undefied risk strategy. So what is the worst that can happen with this strategy and how will you deal with that?

[30:30] >> Yes. So the worst that can happen is that the stock that you're trading goes to zero, right? Which is, you know, unlikely with the underlyings that you're kind of trading. So that's that's the worst worst worst case scenario. The

[30:46] way that I'd manage that kind of risk is kind of twofold. One is managing at 50% of of max profit. I open trades around with an 85% probability of profit on initial trade and of it expiring worthless is 85%. But if you close

[31:03] trades earlier that are in profit, that increases that 85% to 90% plus. So that's one way that I'm reducing the risk. The second way is rolling the

[31:15] option at 21dt. The worst thing that you can do is let the trade run in my Adobe example. let it run into the last week and really hope by chance that it can stays stays above my short put strike because if it doesn't those deltas will

[31:30] rise so quickly and rolling that trade is it still can be done but you'll have to push it out two three four months to pick up any significant types of premium or and and still keep the trade alive. So, I'm not saying it's not possible,

[31:45] but sticking with 21 DTE and closing at 50%. Increases that 85% probability to in the 90s, which again, as I mentioned before, most of these trades do expire

[31:57] in the first kind of campaign at 50% max profit or at a profit at 21 DTE. And again, within one to two cycles maximum generally is I can get out of the trade with a with a small profit. But what if we get a massive fall in the

[32:14] whole market? Um, and you have a number of these trades on. I do think I remember from August last year that there were a number of stories out in people who really got burned both with the 111 strategy and similar 112

[32:31] strategy. Can you actually roll your way out of it if you experience a massive fall in the whole market? piece there that probably should have mentioned is actually is, you know,

[32:45] trade small, right? So I generally only trade one contract on all of my trades at the moment and for context, my account size is about 160 odd uh 60 oddk where I've got four to five positions on portfolio margin. So that does help. But

[33:01] again, even though I could probably increase my lot size from one to four quite comfortably, trading only one lot size, even if the worst case like you mentioned happens and you know, a lot of my positions fall underwater, I can have

[33:14] was during the tariffs. I had about six, seven different underlines on during back in April this year where everything started to tank. my positions were underwater. But at 21 DTE, because I traded small, I was able to do

[33:28] variations of those four options that I walked through to be able to get out of each one of those trades with the profit and and they're all closed. As you know, of those positions are now are now closed. Again, I'm not saying it's I

[33:42] will never ever take a loss. I'm not saying that I w I won't lose money, but as long as we trade small, manage at 50% and manage it and roll at 21 DTE, rolling is your friend here. And again, I love rolling options. And I know some

[33:56] it's like taking a loss, but buying yourself more time to be right and increasing your break evens for me just makes total sense. I always ask my guests to place their

[34:10] strategy and way of trading on a risk profile scale where one is very low risk profile scale where one is very low risk and 10 is a very high risk and uh you are free to define these numbers as you see fit for the purpose. Where would you

[34:25] put it? Like I've mentioned throughout throughout this interview, it really depends on how stringent your rules are for not only entry but also managing. So if you're a true like a true beginner, I would put this around a five or a six

[34:40] because ultimately is undefined risk. But again with practice for trading But again with practice for trading small, picking the right stocks i.e. high volatility, high option volume, picking the right dates to expiration,

[34:54] giving yourself enough time to be right, the right entry criteria of a wide break even and proper management closing at 50% and rolling at 21 DTE. I would then say it's around a two or a three just because you have the ability to roll uh

[35:10] as time as as time goes on. >> Let's move to your actual results trading this strategy. How do you measure your results and what have been your results the last few years? >> This strategy achieves around you know

[35:26] 60% return on the buying power that I'm using. So again, for context, in terms of overall buying power, I'm using about half half the buying power that I've got available for this particular strategy. So when you net it all out, it's around

[35:41] 30% of my overall trading account that I've achieved over the last two years. And that's because I've placed more and more trades as I've got more familiar with the strategy, worked out my mechanics, and also as my trading

[35:53] and place more trades. >> But the trades obviously have different lengths. Some go for 21 days and you are out. Others may go for many months. Have out. Others may go for many months. Have you tried to annualize these results?

[36:08] Yeah. So it's kind of annually nets out at about 30% of which majority of them at about 30% of which majority of them are closing at 50% or more. Some of them because I roll for multiple cycles like three cycles for example. So let's just

[36:21] say I open a trade for $500 initial credit, but I roll it three times for credits and therefore the overall premium comes to a,000. I then will close that trade to best part of $1,000 or $500 at 50% where in the initial

[36:37] trade it would have been $200 or $250 of the initial credit. So when it goes wrong, I actually tend to make more money than the initial 50% credit that I take if that if that makes sense. So that's how I net out around the 30%

[36:50] mark. >> So what would be good resources to learn about this strategy >> in terms of in terms of resources? The best thing the best way I would like to look at it is utilizing the concept of

[37:04] tasty. So Tasty, you know, they kind of define this as like, you know, put a put ratio spread or a call ratio spread, similar to kind of strategy where they put the the the naked short option at the same strike as your short leg of the

[37:18] debit spread. So it's kind of like a one two kind of strategy. And the reason why I love Tasty, I learned the mechanics of my 21 DTE, 45 to 60 days out, manage at 50%, all of this stuff. They've got a really in-depth research team that does

[37:33] a lot of the studies on our behalf and they present those findings for free and present backs what are the optimal mechanics for trading undefined risk options. They do do a lot of defined risk as well but traditionally the

[37:45] traders at Tasty Trade do undefined risk and that's kind of how I built my mechanics. So the mechanics are the same for all my undefined risk strategy trades, not just the 111. And that philosophy that Tasty has been teaching,

[37:59] you know, that that's something that they can do there. And again, I do have my own YouTube channel where I walk through all of this stuff. So if anyone's interested in checking that one out and I show all my trades, I do

[38:11] you can kind of see how much income I'm making through the 111 and my other various trading strategies. What about books about options trading? Do you have a couple to recommend? >> I don't I've not actually read any books

[38:26] on options trading, but one one of the things I do recommend is for Tasty Trade, they have a segment called the life cycle of a trade. So, it's a playlist on their YouTube channel. And what that is is a number of traders that

[38:40] what that is is a number of traders that walk through from start to beginning of trades where they've made money, lost money, or got out at break even. The ones that I'm really interested in are the ones where they turn losers into

[38:53] winners. So, it's a kind of common theme in this interview is the bit I'm really focused on is how do I manage the losers because the winners kind of take care of themselves and we know that, right? So what it does is that they go through

[39:07] examples of where they sell puts and they're deep in the money and then they stuff through the kind of mechanics that we've kind of gone through today. And it's just more inspiration and motivating that they are trading larger

[39:20] accounts than I'm trading and they've got some real options trades that are gone underwater but they can trade their way out of trouble and that's where I draw my inspiration and how I make myself a better trader in trying to make

[39:35] undefined risk as less risky as possible. >> Thank you very much So for sharing your strategy and your way of trading. I would of course also recommend people to watch some of the other interviews we

[39:50] have on this channel including an interview we have about the 112 strategy that has some similarities to this. So that link should pop up on the screen. But thank you very much for your indepth explanation of your strategy and your

[40:07] >> No worries. Bruce, John, thank you. Take it.