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+214  •   The Intelligent Option Investor
+from a portfolio of short puts with the yield I might generate from a cor -
+porate bond portfolio. With this consideration, and keeping in mind that 
+these investments are unlevered, 2 the name of the game is to generate as 
+high a percentage return as possible over the investing time horizon while 
+minimizing the amount of real downside risk you are accepting.
+T enor Selection
+To maximize percentage return, in general, it is better to sell options with 
+relatively short-term expirations (usually tenors of from three to nine 
+months before expiration). This is just the other side of the coin of the 
+rule to buy long-tenor options: the longer the time to expiration, the less 
+time value there is on a per-day basis. The rule to sell shorter-tenor options 
+implies that you will make a higher absolute return by chaining together 
+two back-to-back 6-month short puts than you would by selling a single 
+12-month option at the beginning of the period.
+During normal market conditions, selling shorter-tenor options is 
+the best tactical choice, but during large market downdrafts, when there 
+is terror in the marketplace and implied volatilities increase enormously 
+for options on all companies, you might be able to make more by sell-
+ing a longer-tenor option than by chaining together a series of shorter-
+tenor ones (because, presumably, the implied volatilities of options will 
+drop as the market stabilizes, and this drop means that you will make 
+less money on subsequent put sales). At these times of extreme market 
+stress, there are situations where you can find short-put opportunities 
+on long-tenor options that defy economic logic and should be invested 
+in opportunistically. 
+For example, during the terrible market drops in 2009, I found a 
+company whose slightly ITM put long-term equity anticipation securities 
+(LEAPS) were trading at such a high price that the effective buy price of 
+the stock was less than the amount of cash the firm had on its balance 
+sheet. Obviously, for a firm producing positive cash flows, the stock should 
+not trade at less than the value of cash presently on the balance sheet! I ef-
+fectively got the chance to buy a firm with $6 of cash on the balance sheet 
+and the near certainty of generating about $2 more over the economic life 
+of the options for $5.50. The opportunity to buy $6–$8 worth of cash for