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Strategy
1. Find an underlying in bottom or uptrend, definitely not in down trend. (trend defined by 50MA on Weekly chart)
2. The underlying is volatile(at the money option premium >10%), then 5-10% out of money call of next month is worth 5-10%
3. Start with selling cash secured naked put 5-10% out of money, collecting 5-10% premium. Timing it close to or ideally under 50MA
4. If the underlying drops unexpectedly and the put is assigned, buy the underlying.
5. Immediately after owning the underlying, sell 5-10% out money call, collecting 5-10% premium
6. If the underlying drops unexpectedly 5-10% and the sold call loses half of its premium, buy it back and sell 5-10% out of money on the current price, collecting 5-10% premium.
7. If the underlying moves up a lot and the sold call is assigned, give up the underlying, and start all over again from 3.
Result:
1. Collecting premium is the core, 5-10% every month.
2. Downward protection, 5-10% initial cushion on the underlying, and with roll over strategy, the cushion is more in 7-15% range.
3. If the underlying moves up slowly, get 5-10% premium as well as underlying appreciation of 0-10%.
4. If the underlying moves up fast, 5-10% a month, get maximum return of 10-20%
Candidate underlyings:
1. SPY
2. USO
3. SSO 2x SPY
4. SDS 2x reverse SPY
5. XIU
6. HXU 2x XIU
7. HXD 2x reverse XIU
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