What do you guys think about a play along these line: When a stock, in this case I'll use MRK as an example, takes a dump on bad news that doesn't really affect their future...especially if they are well capitalized ... you sell long dated puts at a price slightly below LT support. In MRKs case, I think that would be $25ish. The idea is to sell the fear volatility built into the dump move. And the close would depend on how the stock fares. If it bounces immediately (1-2 months) you cover for a quick profit. If it doesn't you let it ride out for a nice % pa return. Another recent example might be CIBC (Enron settlement). The only problem I can see is that if you don't capture the stock as it is dumping with extreme fear you may not have much volatility to sell later on. For example, MRK has settled down into a price range now and the vol. has also settled down. An ATM 27.5 strike Apr'06 put would only give you around 14% return and a 25 strike Apr06 would give you 8% return. Measely and not worth the position's risk IMHO. Any ideas re this?