Income Strategy

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