Big Bets? Big Mistake in This Market

There's a time and place for everything, and good traders don't try to force what's not there. I want to be bullish again. I want to be optimistic and hopeful about the future. I want to love this economy, but I'm worried about getting blown away.

This week's obviously starting off volatile at best and downright ugly at worst. Monday's steady, flat action has given way to the downside-dislocating kind of action today. Aaron Task called this action "the eye of the storm," and indeed, the action's likely to get back to being consistently volatile.

After so much steadiness, this wild action of the last few weeks has a lot of my more aggressively trading friends back in action. Indeed, for more aggressive traders, the volatility in this marketplace is a welcome change.

I've been writing lately about how you can probably make good money buying extreme downside and selling extreme upside moves in the near term. These dislocations (2% intraday moves in major market indices) to both the downside and the upside create good opportunities for trading, and even as I'm going to remain cash-heavy and cautious, there are going to be lots of good opportunities as the equity markets continue to gyrate.

You can see this volatility revealed in another updated VIX chart:

Though the mainstream media -- and the politicians they pander to -- often substitutes "volatility" for "weakness," it's very important that a trader realizes the two are vastly different. We usually associate the two terms because you can only have volatility when there are big moves to both the upside and the downside. Otherwise we'd call it steady rally action or steady selloff action. More important than the semantics, of course, are the trading dynamics around each term.

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Cody Willard is the manager of CL Willard Capital Management, LLC. He is a regular guest on Fox News, CNBC and other networks, and he writes a monthly column for the Financial Times. He is also an adjunct professor at Seton Hall University and the author of TheCodyReport.net, a monthly stock market newsletter. Willard appreciates your feedback -- click here to send him an email.