Put 1-1-2 Strategy
About 120 days out: buy a 0.25 Δ put, sell a 0.20 Δ put and sell two 0.07 Δ puts, for a credit. Take half, close if the price nears the two short puts, out at 30 days.
Default settings, 2020 to Nov 4, 2026.
By stock and year
Select a row to chart it below. Shade is the gap to buying and holding that stock.Unhedged: nothing protects against a crash beyond what the strategy itself holds.
| Stock | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 YTD | CAGR | B&H CAGR | Max drawdown |
|---|---|---|---|---|---|---|---|---|---|---|
| −4.6%−19.8 | +1.3%−25.6 | −4.2%+15.3 | +5.4%−18.9 | +5.8%−17.5 | +2.5%−13.9 | +3.7%−8.8 | +1.4% | +13.4% | −8.9% | |
| −0.6%−45.8 | +1.2%−25.6 | −5.9%+27.1 | +6.6%−47.1 | +6.0%−18.8 | −0.4%−20.6 | +4.6%−8.0 | +1.6% | +18.5% | −7.1% | |
| −8.4%−26.9 | +2.2%−11.1 | −1.6%+20.0 | +5.0%−10.1 | +6.3%−3.8 | +4.1%−7.3 | +5.4%−10.0 | +1.8% | +8.2% | −12.7% | |
| +0.2%−117.6 | +0.6%−124.6 | +0.3%+50.6 | +5.9%−233.0 | +5.2%−165.9 | +4.3%−34.5 | +3.4%+3.3 | +2.9% | +65.2% | −1.4% | |
| −5.8%−82.5 | +3.6%−30.2 | −6.5%+20.3 | +4.6%−43.6 | +5.1%−24.9 | +4.1%−4.4 | +3.2%−25.4 | +1.1% | +25.2% | −10.6% | |
| −4.4%−19.6 | +0.7%−26.2 | +2.8%+22.3 | +5.8%−18.5 | +5.7%−17.7 | +4.9%−11.5 | +3.8%−8.6 | +2.8% | +13.4% | −6.1% | |
| −1.1%−46.2 | +0.7%−26.1 | +3.1%+36.1 | +5.9%−47.9 | +5.5%−19.3 | +2.8%−17.4 | +3.9%−8.7 | +3.0% | +18.5% | −5.0% | |
| −8.6%−27.0 | +2.3%−11.0 | +3.5%+25.1 | +4.5%−10.6 | +5.7%−4.4 | +5.5%−6.0 | +4.8%−10.6 | +2.5% | +8.2% | −12.3% | |
| +0.3%−117.4 | −0.3%−125.5 | +0.9%+51.2 | +5.0%−233.9 | +5.3%−165.9 | +4.6%−34.3 | +3.5%+3.4 | +2.8% | +65.2% | −1.8% | |
| −5.2%−82.0 | +2.3%−31.5 | +4.5%+31.3 | +6.1%−42.1 | +5.1%−24.9 | +4.1%−4.4 | +3.2%−25.4 | +2.9% | +25.2% | −8.7% |
Growth of $10,000
Weekly closes on a log scale; the red shade is the strategy's drawdown from its last high. Returns are on the capital the strategy needed at its peak, with interest on idle cash. Hypothetical: how the backtests are made.
Rules · the when / do flow, read-only until you make a copyShow flow
The strategy runs as 2 tracks side by side. Each day, the first rule whose conditions hold in each track acts.
1. 1-1-2
- INOpen the 1-1-2
When:
book.open == 0Do: buy put (as lp)delta long_delta (0.25)dte dte (120)dte_min dte_min (90)dte_max dte_max (150)avoid_earnings 1strict 1; sell put (as sp)delta mid_delta (0.2)strike_max leg.lp.strike - 0.001expiry leg.lp.expirystrict 1; sell put (as np)qty 2delta naked_delta (0.07)strike_max leg.sp.strike - 0.001expiry leg.lp.expirystrict 1 - TPHalf the credit kept: close
When:
book.pnl_pct >= take_pctDo: close lp; close sp; close np - SLNear the two short puts: close
When:
spot <= leg.np.strike * (1 + test_pct)Do: close lp; close sp; close np - EXexit_dte left: close
When:
leg.lp.dte <= exit_dteDo: close lp; close sp; close np - Closed or expired
When:
book.open == 0Do: nothing (hold)
2. Crash put
A cheap far put under whatever is held; hedge_delta 0 turns it off
- CP1Something is held and no crash put: buy one
When:
hedge_delta > 0andleg.hedge.open == 0andshares >= 100 or book.open > 0Do: buy put (as hedge)qty max(1, round(shares / 100))delta hedge_delta (0)dte hedge_dte (90)dte_min hedge_replace_dte + 7strike_max spot - 0.001strict 1 - CP2Nothing left to protect: sell it
When:
leg.hedge.open == 1andshares < 100andbook.open <= 1Do: close hedge - CP3Down to its last month, or worth hedge_take_x its cost: sell it and buy a fresh one
When:
leg.hedge.open == 1andleg.hedge.dte <= hedge_replace_dte or (hedge_take_x > 0 and leg.hedge.mark >= leg.hedge.cost * hedge_take_x)Do: close hedge; buy put (as hedge)qty max(1, round(shares / 100))delta hedge_delta (0)dte hedge_dte (90)dte_min hedge_replace_dte + 7strike_max spot - 0.001strict 1
Parameters and defaults
Every named number in the rules can be changed in the Rule Builder. These are the defaults the backtest used.
| Parameter | Default |
|---|---|
long_delta | 0.25 |
mid_delta | 0.2 |
naked_delta | 0.07 |
dte | 120 |
dte_min | 90 |
dte_max | 150 |
take_pct | 50 |
test_pct | 0.03 |
exit_dte | 30 |
hedge_delta | 0 |
hedge_dte | 90 |
hedge_replace_dte | 30 |
hedge_take_x | 3 |
Make a copy to change any of it and run your own backtest.
Trade log · every open, roll, assignment and close for SPYShow trades
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About 120 days out: buy a 0.25 Δ put, sell a 0.20 Δ put and sell two 0.07 Δ puts, for a credit. Take half, close if the price nears the two short puts, out at 30 days.
What it is
About 120 days out, buy a 0.25 delta put, sell a 0.20 delta put and sell two 0.07 delta puts, for a credit. Take half the credit, close if the price comes within 3% of the two far short puts, and close at 30 days left.
When to use it
Use it on an index when IV is reasonable and you expect no crash: it pays if the market drifts or falls moderately.
Maximum risk
Below the two far short puts the loss grows with no limit but the stock's fall: it is like holding short puts. The backtest closes before that point.
Questions
What do the three parts do?
The 1×1 is a put debit spread that profits on a moderate drop; the two far short puts pay for it and add the credit.
Why so far out in time?
The far short puts decay slowly and stay far from the price, which is what the trade relies on.
What does the hedged version add?
A cheap far put under the position, swapped monthly: protection against the crash the two short puts fear.