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Halftime—Jon Najarian: Options Activity Could Mean Red Flag for Emerging Markets

Jon Najarian on Monday spotted some "unusual activity" that could be a red flag for the emerging markets.

In terms of both the stock and options, there is "great liquidity" in the iShares MSCI Emerging Markets Index exchange-traded fund, Najarian said. As far as options go, the March 46, 42 put spread does stand out to him, but he said there's a lot of open interest.

There is also considerable action in the May 40 puts, Najarian noted, which is trading well below the current stock price of $40.

Najarian thinks traders see the May 40 puts as protection, being as it's an unusual and very speculative call to make at this point in time.

Najarian said that for EEM, there are 10 puts trading for every one call right now.

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POPS & DROPS

Stocks added to gains Monday as investors digested strong earnings and economic news, but remained queasy about the events unfolding in Egypt. Amidst it all, the "Fast Money" traders found these market movers to be noteworthy.

Pops (stocks that went higher)

Chesapeake Energy (CHK) popped 6%:Cnooc, China's largest offshore energy producer, agreed to pay $570 million in cash for a one-third stake in Chesapeake's Niobrara shale project. Najarian noted that analysts think Chesapeake could see more of this activity going forward.

Drops (stocks that went lower)

iShares MSCI Israel Cap Invest Mket Index (EIS) dropped 2%: The exchange-traded fund fell in the wake of Egyptian unrest, said Kanundrum Capital's Brian Kelly. For those who think the anti-government protests will spread throughout the Middle East, he recommends shorting EIS. Kelly himself doesn't think that's the best way to play the news.

CVS Caremark (CVS) dropped 1%: Sanford Bernstein cut the stock to ‘market perform’ from ‘outperform’ with a price target of $39. Stuart Frankel's Steve Grasso would like to see it hold its 50-day moving average. The stock dipped below that level twice intra-day. He said $33.92 is the level to watch. It should hold that level for a few days before investors get in, he explained.

Gannett (GCI) drops 3.5%: The largest U.S. newspaper chain reporting its fourth-quarter net income rose 30 percent on flat revenue. RiverTwice Capital's Zachary Karabell does not believe in print media and would avoid this stock.

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CALL THE CLOSE

Following is a roundup of where the "Fast Money" traders think the market will go, and how they plan to trade it.

"Sell gold, buy equities," said both Grasso and Karabell.

Najarian is also a buyer of equities, but is concerned that the volatility index is above the 50- and 100-day moving average.

Kelly thinks the market could go lower. He's a seller.

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Trader disclosure: On Jan. 31, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MT), (MHY), (NDAQ), (PFE), (PRST) and (S). Pete Najarian owns (F) calls and bonds. Pete Najarian owns (V) call spreads. Pete Najarian owns (YHOO). Pete Najarian owns (MS). Pete Najarian owns (JPM) call spreads. Pete Najarian owns (C). Pete Najarian owns (BAC) call spreads. Pete Najarian owns (GE). Pete Najarian owns (TCK). Karabell owns (FCX), (BRCM), (CSCO), (GE), (FXI), (C), (AAPL), (GOOG), (GS) and (RIMM).

Comcast is the parent company of CNBC
Comcast is the parent company of NBCUniversal
GE owns 49% of NBCUniversal
GE owns 49% of CNBC

BRIAN KELLY
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (ARMH)
Accounts Managed By Kanundrum Capital Own (ATW)
Accounts Managed By Kanundrum Capital Own (RDC)
Accounts Managed By Kanundrum Capital Own (BAC)
Accounts Managed By Kanundrum Capital Own (MON)
Accounts Managed By Kanundrum Capital Own (MCP)
Accounts Managed By Kanundrum Capital Own (LYC.AU)
Accounts Managed By Kanundrum Capital Own (TBT)
Accounts Managed By Kanundrum Capital Own (TER)
Accounts Managed By Kanundrum Capital Own (YGE)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Own (JJG)
Accounts Managed By Kanundrum Capital Own (MS)
Accounts Managed By Kanundrum Capital Own (GMCR) puts
Accounts Managed By Kanundrum Capital Are Short (XLF)

STEVE GRASSO
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (ABX)
Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NEM)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (RDC)
Stuart Frankel & Co and its partners own (S)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UAL)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)

ZACHARY KARABELL
River Twice Capital Owns (BRCM)
River Twice Capital Owns (CSCO)
River Twice Capital Owns (MSFT)
River Twice Capital Owns (QCOM)
River Twice Capital Owns (GS)
River Twice Capital Owns (IBM)
River Twice Capital Is Short (SPY)
River Twice Capital Is Short (SMH)
River Twice Capital Is Short (XLF)
River Twice Capital Is Short (XLI)

CRAIG BERGER
FBRCM acts as a market maker or liquidity provider for (INTC)
FBRCM acts as a market maker or liquidity provider for (BRCM)
No disclosures in (AMD)

KAREN FINERMAN SOT 12/13/2010
Finerman had no disclosures in (MEE) on 12/13/2010

CNBC.com with wires.

Symbol
Price
 
Change
%Change
VIX
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EEM
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GCI
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CVS
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