No one seems to know what is causing the market volatility of late. 

Interest rate jitters have been limiting gains for months, but recent economic news doesn’t seem to point to an imminent increase by the Federal Reserve. Geopolitical worries surrounding Greece have not really hit asset values significantly either, and global monetary policy is still supportive of growth.

#-ad_banner-#Despite there being no obvious cause, market volatility has jumped since the beginning of March, and the S&P 500 is off its recent high by almost 3%. 

We have been here before though. The market dove 9.9% from April through June of 2012 before continuing its ascent. Asset prices sold off 7.4% from mid-September through mid-October of last year, as well. Both of these sell-offs started as little more than routine profit-taking and were over within a short period. 

This sell-off appears no different than prior ones, with global monetary stimulus and U.S. economic growth promising to support asset prices. Stocks have soared since the end of the recession, but valuations are not nearly as high as prior peaks. 

Despite strong gains in stocks since the market’s 2009 low, there’s really little reason to believe that any sell-off will accelerate into a full-blown bear market. While unemployment has come down considerably, wage growth is still elusive, which means corporate profits should continue to rise. Consumer inflation around 1.7% annualized is well below the 2% target set by the Federal Reserve, so there is little pressure for Chair Janet Yellen & Co. to hike rates meaningfully. 

Globally, all the major central banks are now attending the monetary stimulus party, and Europe’s plan to spend 1.2 trillion euros on stimulus over the next 17 months should help to finally jumpstart the region. The resulting rise in the U.S. dollar has hurt earnings at U.S. companies, but it is presenting opportunities in foreign-denominated bonds and acquisitions. 

Even considering minor geopolitical risks in Greece and Yemen, there is little reason to expect significantly lower stock prices in 2015.

While markets should resume their climb through the end of the year, how do you avoid sitting on the sidelines during a near-term sell-off? Is it possible to make money while the rest of the market takes a momentary breather?

I’ve found a strategy that might help you make money over the next couple of months even if the market stumbles, and it involves one of the most iconic names in the United States. 

Limited Risk From An Iconic Brand That’s Already Sold Off
Shares of Ralph Lauren (NYSE: RL) got slammed in early February when the company missed expectations on third-quarter earnings by $0.09 per share, mostly due to the weak foreign exchange rate and higher promotional spending. The company also revised its 2015 guidance for sales growth of 5% to 7% down to 4%, sending shares of the 48-year-old apparel brand tumbling 18%. The stock is now trading at its lowest point in more than three years. 

While a stronger dollar could weigh on earnings for the rest of the year, the worst is likely over for this well-known aspirational brand. The company booked double-digit growth on its e-commerce platform, as well as on international sales over the past quarter. Management plans on raising prices in Japan, Canada and Europe, where currencies have fallen the most. Over the longer term, the company is reorganizing to form global brand groups that should help reduce operating costs.

The strength of the brand is seen in its 58% gross margin, well above the industry average of 41%. Even with the recent weakness in sales, revenue has increased at a compound annual rate of 8.5% over the past 10 years.

Shares of RL currently trade for 16.1 times trailing earnings, well below its five-year average multiple of 20.6 and below the industry average of 22.5. Earnings for the full year are expected to fall 7.7% to $7.79 per share but would still only represent a multiple of 16.8 at current prices.

Limited Downside Risk… Even In A Sell-off
Ralph Lauren has seen its sell-off and could be relatively immune from market volatility on its strong brand, potential for higher international sales and already low valuation. The company is estimated to report fourth-quarter earnings around the second week of May. However, shares already appear to reflect management’s lowered sales guidance, so this should pose limited downside risk.

To take advantage of this, and to potentially buy shares at an even bigger discount, I am going to employ a put selling strategy. If you’re not familiar with this strategy, I urge you to watch this eight-minute tutorial. It might be one of the clearest explanations of options selling anyone has ever published. And it’s given by an options expert with a 100% success rate. You can watch it here.

With shares of RL trading for $131.22 at the time of this writing, we can sell the RL Jul 135 Puts for a limit price of $8.80 each ($880 per contract).

If RL does not close above the $135 strike price at expiration on July 17, we will be assigned shares at that price. Since we received $8.80 in options premium, our actual cost is $126.20 per share, a 3.8% discount to current prices. To cover this potential obligation, we will need to set aside $12,620 per contract, plus the $880 we received from selling the puts. 

If RL closes above $135 on expiration, we keep the premium for a gain of 7% in 110 days. If we were able to make a similar trade every 110 days, we would generate a 23% annual rate of return. 

The strike price is only 2.9% above current prices, and I am expecting some rebound on better earnings released in May. I think shares could trade around $140 per share, which would be 18 times expected 2015 earnings. 

Note: On Thursday, my colleague, Amber Hestla, received the 2015 Charles H. Dow Award, which highlights outstanding research in technical analysis. This honor was given for her work on an indicator that has helped her close 86 straight winning trades using this strategy. Amber put together a short presentation detailing that strategy, which you can access for free here.

This article was originally published on ProfitableTrading.com: American Icon’s Sell-off Could Make It the Perfect Stock to Trade Now