If you’re trading 1-1-2 or 1-1-1 strategies, understanding how Options Auto Trader handles take profit and stop loss during a bear trap is essential. This guide explains how the software manages trades in this scenario.
A 1-1-2 trade consists of:
A put debit spread that profits when the market moves down.
A sold put (or two puts) that generates credit and profits if the market moves up or stays flat.
The trade creates different profit zones:
Above the put debit spread → Normal profit range.
Below the put debit spread but above the short put → Bear trap zone (potential for 3-4X payout).
In the normal profit range (above the put debit spread):
Take profit and stop loss rules apply based on the trade’s credit.
If, for example, take profit is set to 80%, the trade will close automatically when 80% profit is reached.
Stop loss will trigger if the trade moves against you beyond your defined risk level.
When the stock price drops below the put debit spread but remains above the short put, you enter the bear trap zone, where a higher potential profit (3-4X payout) exists.
In this case:
Stop loss still applies → If the trade moves against you, the software will close it to limit losses.
Take profit is ignored → The system does NOT close the trade at a predefined profit level.
Normally, take profit is based on credit, which may lead to early exits and missed profits in a bear trap.
If take profit were applied in this zone, you might only capture a fraction of the full payout.
Best practice → Let the trade expire to realize maximum profit.
While automated take profit is disabled in the bear trap, you can still manually close the trade at any time.
If you prefer to exit early, you can use the software to close the position manually.
In normal profit zones, take profit and stop loss apply.
In the bear trap zone, take profit is ignored, but stop loss remains active.
The best strategy is to let the trade expire to capture maximum profit.
You always have the option to manually close the trade if desired.
By following this structure, you can optimize your 1-1-2 trades for better returns while managing risk effectively.
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