I have been selling OTM puts on the ES for about three years. When volatility was low, I just sat on the puts until they expired. In 2007, volatility began to increase; so I began [delta} hedging my short puts with short ES futures. In addition, I exited my puts at a predetermined point and exited the hedge as well. When a loss occurred, it was about equal or less than the premium received. When I had a gain, it was typically a little less than the premium received, for I had to exit the hedge when delta became so low. Sometimes, when the ES reached my strike price, I simply covered instead of exiting. I was very uncomfortable with this strategy and won't repeat it. Now, with high volatility, I sell fewer contracts at higher premiums and hedge with ES futures. I still use a predetermined exit for the puts as well as the hedge. I still find this better than any spread strategy for monthly income. I am seeking comments to this current strategy. Here is an example of one bad trade I experienced this year using this method: I sold 10 P1265 ESH8 at 12.00. I hedged it with 2 ESH8. I added another ESH8 when the ES dropped 1%. So, at this point, I am short 10 P1265 and short 3 ES FUT. I am well hedged. Now, the market rebounds. I have buy stops 10 points above each entry point for my FUT hedges. All of the FUT hedges are taken out. So, instead of a potential profit of $6,000.00 from premiums, I am down to $4500.00. The market for the options moves down to a price of 3.00. If I closed out the short options at this point, I would have a profit of $3,000.00. Of course, my goal is to allow the options to expire. And of course, the markets drops to where the price of the puts is 8.25. So, here is my dilemma. Do I exit the trade and take the miniscule profit or do I keep the short options and just start hedging again as before? There is still three weeks to expiration. Again, your comments are appreciated.