Profits Jump, Shares Plunge

So what's the best strategy at this point?  Short?  Cash?  Bottom fish?  Answer:  All of the above.  At this point, I'll be looking for low volatility, quality stocks that have taken a beating for my longer term holdings.  For the short term, I'll be playing some speculative bearish spreads mixed in with some speculative long spreads.  The bottom line, I'll be fully hedged and know my maximum loss long before the trade is ever executed.  If you're an options guy, big down days usually result in inflated premiums.  If I'm looking at a speculative play to the upside in a high vol environment, a butterfly may be in order.  Butterflies can be directional plays and also benefit when volatility drops.  If you're not familiar with mechanics of a butterfly, I pick it apart real good in "A Live Butterfly".  If you're looking to catch a bounce after a big down day, a butterfly may be the answer, but you've got to be right in two out of three to make it a good trade.  But you can almost count on volatility going down when the market goes up.  So I typically lean bullish with my butterflies.  On the short side, you can consider a bearish calendar or a bear call spread.  Bearish calendars might be good to capture a spike in volatility.  Bear call spreads will leave you somewhat vol neutral.  It all depends on where the strikes are.