How to earn an income from a flat market

 

 

 

 

 

 

 

 

 

 

 

A client of mine has kindly emailed the chart above to me, a weekly XJO chart.

The XJO has managed to stay above its bottom trend line and it looks like its going to keep

zig-zagging until it decides what it wants to do or which direction it wants to go.

Levels to watch on potential breakouts are:

just under 4100 at the bottom and just above 4300

Until that eventuate, its likely to keep moving between the range and hang around 4150 to 4320.

What can we do with such a market?

Ideal for selling strangles.

conservative:

sell apr 4050 put and sell apr 4350 calls for combined income of about 62c per contract

Selling 5 contracts of these will generate about $3100 income (before costs)

Margins obligations: est $10k (cash/shares)

More aggressive:

sell apr 4100 put and sell apr 4300 calls for combined income of $4400 (before costs)

margin obligations: est $12,500 (cash/sahres)

These trades will be manually cut loss – on the upper end, if xjo breaks and stays above 4320 and at the bottom if xjo breaks and stays below 4050

Best scenario for this trade is XJO continues to grind between 4050 to 4350 from now till 19 April (expiry date)

(Not for super)

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