Up until recently, 2017 had not been kind to AK Steel Holding Corporation (NYSE:AKS) stock. It fell over 50% from the December highs. This was a sector-wide problem, not one specific to AKS stock.

There are many factors contributing to this volatility and I won’t pretend to be an expert on them; very few people are.

So today, I will go long AKS stock based on its price action rather than on an endorsement of sector health.

Fundamentally, its value from a price-earnings perspective is in line with its competition, so nothing is obviously bloated. Yet, expectations from the analysts are modest. Most of them have AK Steel as a “hold,” so the risk of surprise downgrades should be minimal.

Technically, AKS stock is at levels that have been pivotal since September 2008. So the recent rally looks like a technical breakout, but one that is likely to face some resistance soon. $7.50 has recently served as a failure point, so bulls will need to work hard and earn the rally beyond it.

Today’s trade is not one that will chase the pop. Instead I will sell downside risk to generate income. This way I can profit even if the rally fizzles. The trick is to find proven support levels that are likely to hold through the year. Otherwise I am ready to own the shares.

AKS Stock Options

The Bet: Sell AKS Jan 2018 $5 naked put and collect 50 cents per contract to open. Statistically, this trade is just better than a coin flip, which makes it a speculative trade in my book. If price falls below my strike I would own the shares and accumulate losses below $4.50. This is more attractive to me than chasing rallies, especially since I have a 25% buffer.

Selling naked puts even on a low-price stock is dangerous and does not suit all investors. But I can accomplish the same goal by selling spreads instead.

The Alternate Bet: Sell the AKS Jan 2018 $5/$4.50 bull put spread where I have about the same chances of success, but with limited profits. I can, however, still yield 30%. In either setup, I simply need AKS stock to stay above $5 to completely win.

For those who want to also capture the upside move, they can buy a debit call spread for that.

The Juice (Optional): Buy the AKS Aug $6/$7 debit call spread for 50 cents per contract. If price rallies past my strike, I stand to double my money. But since my cost basis into the calls is offset by selling puts, any premium I recapture from closing the debit call spread would be pure profit as long as price stay above $5.

As I always say, investing is risky, even with options, so only risk what you are prepared to lose.

Learn how to generate income from options here. Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.