Strategy Source

Creator/Channel: Tom King

Published Date: June 18, 2025

Link: How I am Trading the 112 Calendar Trade

Trade Setup

Action (Sell (-)/Buy (+))	Leg	DTE	Strike Price / Delta Target	Width
Sell (-)	Naked Puts (x2)	60	7 to 9 Delta	N/A
Sell (-)	Short Put (Debit Spread Leg)	120 to 150	100 points below Long Put	100
Buy (+)	Long Put (Debit Spread Leg)	120 to 150	15 to 20 Delta	N/A

• Total Capital Required: Approximately $14,000 in buying power per active tranche (specifically when trading S&P 500 ES futures).
• Execution Context: The video demonstrates a live trading account managing multiple tranches of the “Calendarized 112” (112C) strategy using index futures (ES).

Strategy Application

The “112C” (Calendarized 112) is an evolved version of the standard 112 options strategy. It involves buying one put debit spread and financing it by selling two naked puts. The “Calendarized” twist splits the expiration dates to drastically lower your risk footprint over time while building a massive defensive wall.

Here is exactly how the mechanics work:

• The Time Differential: Instead of placing all legs in the same expiration cycle, you buy the put debit spread way out in time (120 to 150 DTE) and sell the income-generating naked puts at a much closer 60 DTE. Because the naked puts expire or are closed in about 30 to 45 days, they fall off your books quickly. You are then left holding a “free” 100-day put debit spread. By putting this trade on every two weeks, you constantly accumulate long-term defensive put spreads while keeping your active naked put risk extremely low (never having more than two or three naked put tranches active at once).
• Targeting the Buffer Zone: The creator places the two naked puts incredibly far out of the money, targeting the 7 to 9 Delta (Strike metric / Directional bias or “probability of success”). In the specific ES futures example, with the market at 6080, the naked puts were sold at the 5100 strike—representing a massive 15% downside safety cushion before the core risk is even tested.
• Funding the Trap: You buy the long put debit spread targeting the 15 to 20 Delta (closer to the current market price). The premium you collect from selling the two 60 DTE naked puts easily pays for the debit spread and leaves you with a large net credit (averaging around $1,500 per trade in ES).
• Market Environment: This strategy is deployed mechanically every two weeks. It thrives in stable, slightly grinding, or even slowly falling markets.

Risk Profile

• Wing Widths: The put debit spread is heavily widened to 100 points wide. This wider structure offers incredible flexibility for defensive adjustments and captures significantly more profit if the market falls into it.
• Undefined Downside Risk: The two short puts are completely naked. If the market aggressively crashes past your 15% buffer zone, your structural risk is undefined, and your buying power requirements will rapidly expand.
• Capital Preservation (The 2% Rule): The creator explicitly sizes the maximum allowable loss for this trade at 2% of Net Liquidating Value (Net Liq) per trade.
• Volatility Risk: If implied volatility violently spikes, the naked puts will quickly inflate in price. The calendarized structure inherently mitigates this by ensuring you have a low quantity of active short options at any given time, paired with a massive stockpile of “free” long-term put debit spreads to absorb the shock.

Expected Outcome

1. The “Tail” (Your Base Win)

The market grinds higher, chops sideways, or drops only slightly. Your 60 DTE naked puts decay naturally. You keep the net credit collected up front, and the out-of-the-money put debit spread eventually expires worthless. You win simply by the passage of time.

2. The “Trap” (The Downside Bonus)

The market experiences a steady selloff and drops into your 120-150 DTE put debit spread. Not only do you keep the income from your naked puts (which are placed much lower), but the debit spread begins to rapidly expand in value, acting as a bonus profit center.

Management & Exit Triggers

• Primary Profit Target (Naked Puts): Close the 60 DTE naked puts strictly when they reach 90% of their initial credit (which typically takes about 30 to 45 days, or 75% of the timeline). This clears your buying power and leaves the debit spread running for free.
• Defensive Stop Loss: Close the naked puts immediately if they hit a 2x loss (losing 200% of the initial credit collected).
• Rolling the Risk: If the naked puts are heavily tested near expiration, you can roll them out in time and down in strikes. Because your put debit spread is likely making significant money in this scenario, you can close the debit spread to pay for the cost of rolling the naked puts.
• Locking in Trap Profits: If the put debit spread begins making heavy profits during a market drop, you can roll the short leg of the spread up by 50 points. This locks in guaranteed cash while still leaving a 50-point wide trap active.
• Converting to a Pure Hedge: If the short leg of your put debit spread hits 90% to 95% profit on its own, you can buy it back for pennies and leave the long put completely naked as a pure, hyper-cheap catastrophic hedge.