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Range-bound trading is a strategy that involves identifying stocks trading within a narrow price range.

Once identified, these stocks are ideal for writing a Collar Option. A Collar Option provides a safety net against any fall in the price of the underlying stock. There are two potential outcomes of this trade. One, the stock would be called away if the price rises above the call option strike price. Alternatively, the call sold would expire worthless if the underlying stock falls or remains within the price range of the trade. This trading strategy, while not providing growth, can create an income stream from the dividends and the call option premiums. Dividend-paying stocks that have shown a narrow price movement are ideal for this trade. An example would be Pfizer, which has a dividend yield of over 6% and has moved within a narrow price range over the past year.