Playing The Financial Freefall

Friday, 18 Jan 2008 | 4:57 PM ET

Financial earnings are expected to plunge in the fourth quarter with one time charges responsible for much of that weakness. Should you put on a bull call spread in the financial free-fall?

On CNBC’s Closing Bell Jon Najarian reveals that he’s seeing unusual options trading in two financial stocks, CIT Group and Assurant. Following are his plays.

CIT Group (CIT)

CIT Group is a financial services company that’s getting hit with the same tar that a lot of financial companies have been hit with, Najarian says. They’re currently trading at a 52-week low but I think they’re in better shape then many other firms in the sector

I recommend getting long by doing a bull call spread, he counsels. That means buy one call at a lower strike price and sell a call at a higher strike. (In other words get long CIT by way of options -- buying calls at the money and selling calls out of the money.)

Assurant (AIZ)

And in Assurant I recommend putting on a bear put spread, Najarian says. That means buy a put at a higher strike price and sell another put at a lower strike price beneath it.

I like that play because AIZ is only $6 off it’s 52-weeks high, he says. It’s an insurance stock that’s I feel has been hanging in there way too long relative to the other stocks in the sector.

Fast Money: Financial Freefall
Fast Money's Jon Najarian, co-founder of OptionMonster.com, shares his take on the financial freefall.

Got something to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap! Prefer to keep it between us? You can still send questions and comments to fastmoney@cnbc.com.

  Price   Change %Change


Contact Fast Money

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET
  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

  • Scott Wapner is host of the "Fast Money Halftime Report," which airs weekdays from 12 p.m. to 1 p.m. ET.

  • Guy Adami is a contributor on CNBC's "Fast Money." He also is managing director of stockMONSTER.com.

  • Najarian, the "Pit Boss," is cofounder of optionMONSTER.com, a news site for options traders.

  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

Halftime Report