Bearish Trade

With volatility slipping to somewhat more reasonable levels (at least in relative terms), it might be worth buying some OTM puts on an index like SPY or DIA. A 85 Put on SPY with a March 2009 expiration is currently $3.10 If you are bearish on the market's reaction to what could be incredibly dissapointing 4Q numbers this is might be a good play because it is both a directional and volatility play.

Because you are long the put, you are long volatility and a return to the higher levels of volatility we witnessed in December will probably bring about both lower prices and higher volatility.

If the market tanks in the next few weeks, don't be afraid to sell the put early and take profits. I would sell at anything above $5.00.

Will check back in before March to check on this trade.