Recession? That's yesterday's news. You want change? Let's talk about the next hurdle: inflation! Don't be surprised if one trillion dollars or more of the bailout spending sparks inflation. What are you going to do now? The only consistent inflation hedges- as if anything is consistent with the recent markets we are experiencing- are tobacco, railroad and utility stocks. These sectors are typically known for high dividend yields and lofty P/E (price to earnings), but with the way these stocks have been beaten down (like MO Altria group, formally Philip Morris), the market has ignored a low P/E multiple of 4 with high 7.25% dividends! And that's not to mention a fat 57% volatility in the options, presenting a fantastic opportunity to try covered calls. By buying shares of MO and selling calls against it, you have decent probability of success in December.



Railroads get a big bang for their buck since they carry exports and imports. So news that the U.S. trade deficit is at historic levels, as imports climbed and exports stayed steady is actually good news for railroads. Is rising energy a concern? Sure, higher fuel costs bump up operating costs, but growing revenue from shipping coal, the cheapest domestic fuel now, should make up the difference. Take CSX, for example. CSX is the third-largest U.S. railroad operator and one of the biggest movers of coal! It has a relatively low P/E of 12%, a dividend yield of 2%, and extremely high option volatility of more then 69%. Buy the covered stock and you have the opportunity to raise that yearly covered return with a strong probability of success in December.



The Williams Companies, Inc. (or WMB) is a natural gas company. The company primarily finds, produces, gathers, processes and transports natural gas, blah, blah, blah...Better yet, it has a low P/E of 8.5% and yields a nice 2.40%, but best of all its option volatility is one of the highest in its industry at a plump 92%. Buy the covered stock and sell calls to write, and again, you have good probability of success, nice!

thinkorswim, Inc. and its employee, Tony Battista, do not solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.