Caviar Breakfast Every Day

The CXO Advisory Blog has a very interesting post on selling index put options. I may have been too quick to dismiss index option selling as too risky. The premiums that the buyers are willing to pay are irrationally high. "For buyers of at-the-money puts to break even, October 1987-like crashes would have to occur 1.3 times per year."

I will be investigating this further. Perhaps if you limit your leverage to reasonable levels, you may be able to confine the drawdowns to something that you can live with.