How Options Can Be a Safe Substitute for Dividends

If you don’t know the horse, bet the jockey. This old quip, heard years ago from a senior trader at a big bank, is worth contemplating like a Zen koan. The message: Rather than trying to guess what may happen in the market, focus on known knowns like the enduring qualities of well-run companies.

Investors can do this by taking advantage of short-term volatility, which influences near-term options premiums, to harness blue-chip stocks with bright long-term prospects.