The most powerful mind-set in the financial markets is an understanding that time and volatility are allies. If you can condition yourself to embrace that fact, you can profit from calamity and good fortune with equal aplomb.

The stock market, as everyone knows, is currently trading around record levels. Various measures of valuation levels are historically elevated, though the implied volatility of the S&P 500 index suggests investors are less worried than market pundits.

All markets and stocks ultimately decline; such is the nature of markets. But it is important to remember that stock markets, over long periods, rise, although not in a straight line. The growth of stock prices, and corporate earnings, is a powerful phenomenon.

Yet, those facts are too often overshadowed by the dour predictions of the commentariat. The stock market, for instance, didn’t decline in August, nor September, nor October, despite many predictions that it would. Seasonally weak months were made strong by generally strong economic data. Lower interest rates also helped.

The often wrong, never in doubt crowd is back. They are still warning that doom may soon erupt from the bid and ask spreads that are the fabric of the stock and options markets.

Hence, it is important to think about how you might handle such an occurrence. The answer is simple: by embracing volatility and time.

When stock prices decline, implied volatility—which is the essence of options prices—increases, often more than merited because investors panic.

When this happens, it is often very profitable to sell puts to panicked stock investors. Puts increase in value when stock prices decline.

Investors tend to pay any price to buy puts to protect their falling stocks. It’s irrational, but true. This is why so many seasoned investors like to sell puts on stocks that they are willing to own.

If you think stocks will continue to rise through the end of year, despite the dour predictions, consider a strategic approach that essentially pays you to participate in any future stock rallies. A good way to do that is selling puts and buying a call.

Our strategy takes advantage of Tuesday’s sharp decline in the stock market, which caused many investors to buy puts to hedge stocks. Fear of stock declines is a key reason why puts are often just a little more expensive than they should be. When a decline actually occurs, puts become even more expensive.

Anyone who wants to profit from those facts can consider a “two-by-one” strategy, which entails selling two puts and buying one call. The strategy generates significant income, while enabling investors to profit from any advances.

While the strategy works on stocks an investor wants to buy at lower prices, it also works on the S&P 500 index and other indexes.

With the SPDR S&P 500 exchange-traded funds around $675, an investor could sell two January $655 puts for about $12 and buy one January $700 call for about $9.40. If the ETF is at $730 at expiration, for instance, the call is worth $30. They money received for selling the puts can be kept if the index is above the put strike prices.

The risk is that the stock price falls far below the put strike price. If that happens, investors must buy the stock at those put strikes, or readjust the position with some trading. Of course, risk is a relative term if you heed the advice on time and volatility.