×

Here's how to profit from the volatility: Trader

While some investors are hoping the volatility in the markets will subside, one trader is hoping for more, employing a unique strategy that is most profitable if the market continues its wild ways.

"The market is stuck in a trading range," Andrew Keene said Tuesday on CNBC's "Trading Nation." "Every time we find buyers, the sellers come in and vice versa."

Looking at a chart of the SPY, the ETF that tracks the S&P 500, Keene identified two key levels on the chart: the high-end of the range, which comes in just under $200 and the low-end of the range at $190. "I think the range will continue," said the founder of Keene on the Market.

Read MoreGartman: Nervous about stock swings, but not oil

To play into the recent volatility, Keene is using what's called an iron condor, an options strategy that looks to trap a stock in a defined trading range. In this setup, a trader will combine a bear call spread with a bull put spread—both of the same expiration. Specifically, Keene sold the September 199/200 call spread and sold the 190/189 put spread for a total credit of 60 cents. That 60 cents is the most he can make, and in order for Keene to keep all that money, he needs the SPY to be between $199 and $190 by September expiration, or through next Friday. The SPY is currently trading around $197.

"I have a $10 range to make money here," added Keene. "I'm fading the rally, but not aggressively fading it because I think we'll be stuck in this range."

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number, and a question to TradingNation@cnbc.com

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect