Volatility can be your friend.

When everyone panics we expect option prices to rise. As more people buy put options for protection we are able to take the other side of the trade and collect more upfront cash on stocks that we already want to own.

The put option premium received (income) reduces your risk in a company or sector that you already are willing to own at today's prices.

Today we will look at buying XLK an exchange traded fund that holds 66 technology companies. With XLK currently in a big uptrend we expect the trend to continue.

The recent market pullback has brought technology down in price and it's bouncing off of its rising 200-day moving average (200-DMA).

Trade details to take advantage of this pullback and bounce.

Sell to open, the November 16, $71 puts on XLK for $1.50 using a limit order. Earn a 2.1% payment on your purchase obligation.

At expiration if shares are above $71: put sellers will keep the $1.50 or a 25.7% annualized return.

At expiration if shares are below $71: put sellers will buy shares at a 2.8% discount to yesterday's closing price.

For protection use a stop loss at $63.50. This will be a closing price below the 200DMA and we'll exit the position for a small loss.

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

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