No. 2 - Volatility: Situation Normal
Traders no longer seem concerned with volatility in the market -- 200 down one day, 200 up the next day. Pete Najarian, appearing on satellite from Chicago, says traders have developed ADHD in response to the bipolar market -- bullish one day, bearish the next. The CBOE Volatility Index (VIX), or 'the fear index,' is the standard indicator of trader anxiety -- and it's relatively low these days despite the roller coaster markets.
Najarian's explanation is that traders are "scalping" the volatility to make a lot of money in short periods of time. Dylan says it seems easy to lose a lot of money quickly, but Najarian says "not so!" According to him, in this volatile market, "you have to pay to play," with volatilities as high as they are.
Najarian's most compelling trade of the moment: Capital One . It's only down 8% compared to its peers, like AmEx , down 30%. "People are looking for a significant correction," he says. "And we're trying to ride that." He admits to already being short with COF, because of its massive put buying today.
Najarian's bottom line: "Sell the rips and buy the dips."
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On Aug 7, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (MSFT) (DIS) (COST) (WMT), Adami Owns (AGU) (BTU) (GS) (C) (INTC) (MSFT) (NUE), Finerman's Firm Owns (ANF) Call Spread, Finerman's Firm And Finerman Own (KALU) (C) Leaps, Finerman Owns (GS), Finerman's Firm Owns (JCP) (MSFT), Finerman's Firm Is Short (IYR) (IJR) (SPY) (MDY) (IWM) (COF) (SPG) (KIM) (XLR), Terranova Owns (INTC) (GOOG) (BNI) (XLF) (IYT) (YHOO) (VLO) (RIMM) (SA) (SU) (KOL) (CME) (FCX), Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd. Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO, Phoenix Investment Partners Owns More Than 1% Of (ABD) (ARE) (BRE) (CNTY) (CLB) (OFC) (DLR) (ESS) (EXR) (FL) (IAT) (IGE) (LNET) (MAC) (OIIM) (PSPT) (DBC) (DBV) (SLB) (SKT) (BLV), Phoenix Diversifier PHOLIO Owns (IGE) (DBC) (DBV), Sandler O'Neill Advised Clients In Deals Involving (BAC) (JPM), Sandler O'Neill Recvd. Inv. Bank. Comp. From (BAC) (C) In Past 12 Mos, Sandler O'Neill Expects To Receive or Seek Inv. Bank. Comp. From (BAC) (JPM) (C) In Next 3 Mos. (BAC) (C) (JPM) (MER), (MS) Are Clients Of Sandler O'Neill. Sandler O'Neill Was A Manager Or Co-Manager Of A Public Offering for (C) In Past 12 Mos. Sandler O'Neill Has Received Non-Inv. Bank. Comp. From (C) (JPM) (MER) (LEH) (BAC), (GS) Is A Non-Inv. Bank. Client Of Sandler O'Neill, Harte has disclosed for (BAC) (C) (GS) (JPM) (LEH) (MER) (MS), Jon Najarian Is Long (COF) Put Spreads, Jon Najarian Is Long (MRVL) Call Spreads, Jon Najarian Has No Position In (VIX)