Volatility has surged as options traders have confronted the worst market decline since the Great Depression. When volatility increases, options prices rise along with it. Some smart traders are stepping aside as the markets bounce around, but others are taking advantage of inflated options prices by selling "naked," or uncovered, puts. Despite their risks, there has never been a better time to sell puts. Higher put premiums mean you can sell strike prices well below the market to distance yourself from the action.

Ideally, a naked put will profit from declining implied volatility (IV) and time value (see "Volatility explained"). Also, the approach has a high probability of success in uncertain markets.