Investors wondering what to do next

March 3, 2009 3:22:00 PM PST
There is no doubt that investors are worried and don't quite know how to react to the volatility of the market. With the economy in turmoil, America's companies are undergoing radical and unprecedented change. That has most investors wondering what they can do until the markets stabilize. Right now, most experts recommend waiting and riding out the hard times.

Traders say the Chicago options exchange is usually much busier. In the Volatility Index option pit traders watch the market closely. The VIX index indicates investors' expectations of volatility for the next 30 days.

"The expectation has changed so dramatically from optimistic to very pessimistic," said Daniel Deming, options trader, Stutland Equities.

"We've sort of gotten used to it, so even yesterday's 300-point drop really didn't affect us," said Matt Shapiro, options trader, Stutland Equities.

Some traders are trying to cope as the markets head in unchartered territory. Many question the previous economic policy of bailing out banks.

"To some degree, they've got to let some of these banks that are in real trouble, just let them go," said Deming.

Vic Lespinasse is a grain analyst at the Chicago Board of Trade.

"In the past when you were trading grains you would concentrate on the weather and grain fundamentals. Now you have to also pay attention to what's going on in the financial markets, the equities like the Dow Jones , the dollar, and markets like crude oil, because when those go crazy like they did yesterday that has a direct bearing on the grain market," said Lespinasse.

With the situation being somewhat ominous and unpredictable, it's very difficult for traders to stay up, but they say it's important to be positive in these difficult times.

"You really do need rallies and positive action amongst even professional investors, let alone small investors," said Shapiro.

Analysts say it is important for investors to pay attention to what is going on in the world.

"There's not a quick fix. It's going to take years and years. Our politicians are going to have to spend wisely," said Dan Flynn, Alaron Futures and Options.

Flynn added, given the uncertainty of the current forecast, there are two key questions to address: Are the current policy measures working? And, when will recovery begin?