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Najarian: Protect Long Stock Positions

By    |   Wednesday, 14 Oct 2009 11:59 AM

Buy put options now to protect your long stock positions, says options specialist Pete Najarian, known as “The Pit Boss” in his role on the CNBC television show Fast Money and co-founder of OptionMONSTER.com.

“My best idea would be that if you still want to be involved in the market going into the end of the year, and you want to buy stocks right now, and you’re just a little bit nervous, it’s a great opportunity to buy that protection we talk about all the time: puts,” he told Moneynews.com.

“The put allows you to buy a stock. You buy the put; it protects you to the downside. You don’t have to know all of the fundamentals. But you want to have yourself educated exactly in all the (options) metrics, and how this works.”

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Buying a put is like buying insurance for your car or home, Najarian explains.

“And when you’re in the stock market these days, obviously the investments are large. You want to buy that put protection. It’s very cheap right now on the low end of the volatility scale.”

As for his own stocks picks, Najarian says he likes the growth area everyone is clamoring about: emerging markets, particularly China.

But he prefers to invest in U.S. companies with exposure to emerging markets, rather than investing in the emerging markets themselves.

“I like the markets here,” Najarian says. “The stocks that could perform the best at this point still are in the commodity space”

And what are those?

“The coal names, the steel names — there are many of them — have pushed to 52-week highs. But I still think there’s more upside. . . I like the names that have direct exposure to China, to the Asian markets.”

Among the companies Najarian favors are Freeport McMoran, Walter Energy, and Peabody Energy.

“You can still buy the stocks, but you better get yourself some protection, because it will be a bumpy ride,” he said.

Najarian says talk of replacing the dollar as the world’s main reserve currency is simply speculation now.

But he does expect the U.S. currency to continue its slide.

The Dollar Index, which measures the greenback’s strength against six major currencies, recently dropped to a 14-month low.

“It’s really just a play right now on the dollar’s weakness,” Najarian said. “There are many ways you can trade off this. Obviously that comes right back to the commodity space.”

He notes that gold is the top item on many commodity investors’ agenda now.

“But you look across the commodity space right now. You will find areas that are far more explosive still than gold and moving to the upside,” such as coal and steel.

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Buy put options now to protect your long stock positions, says options specialist Pete Najarian, known as “The Pit Boss” in his role on the CNBC television show Fast Money and co-founder of OptionMONSTER.com.“My best idea would be that if you still want to be involved in...
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Wednesday, 14 Oct 2009 11:59 AM
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