Ken Trester

Bargain Hunters Beware

by Ken Trester   12/29/08

As some of the country's iconic stocks hit bottom-dollar prices, many investors are feeling the urge to go bargain-hunting.

And while there's nothing we like more than a good deal, this is not the way to make money in a bear market.

The key to profits and success in this market is simple: Buy put options.

The Perfect Storm For a Windfall of Profits

Our latest indicators are giving neutral to bearish readings, as stocks continue to bounce around in a wide and volatile trading range. The boundaries of that range are roughly 7,500 on the downside for the Dow (DJI) and 9,000 on the upside.

Yes, I know that we've seen some impressive days from the indices, and while I hate to be the bearer of bad news, the longer-term trend is still down.

I started trading options the day the public market opened in 1973. In those 35 years, I have never seen a market so volatile with such sustained direction as we have today. To use the cliché, this is "the perfect storm" for options traders.

I don't want to get overconfident, and I certainly don't want to pretend to guarantee future profits, but we options traders are in a sweet spot.