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If I were on a sell-side desk right now, I know just what I'd be selling hedge funds: protection. Not the kind of protection you're thinking of -- I would be selling them upside protection. I would offer a basket of calls on some stocks that I think could have radical moves to the upside.

What kind of stuff would be in the upside protection basket? Summer-dated calls up two, three, four or five points in names like Dow Chemical, GM, DuPont, 3M, Honeywell, IBM, International Paper, Alcoa, Boeing and Ingersoll-Rand.

These are the names the market doesn't have enough of. These are the names that could explode up 10 points and not be too expensive if the economy turns around. These are the names people really need protection from on the upside.

By the way, you don't need protection in Intel, Cisco, Dell, Microsoft and Oracle. Those will be valuation-challenged up that much.

But I think the industrials are gathering strength. Most hedge fund managers are all net zero to 50% long. No more than that. They are uniquely positioned for the "coming" downside.

However, the upside could leave them in the dust and vulnerable for massive redemptions at year-end.

That's why this protection basket would sell itself. Darn it all, I wish I could sell it. I'd have a couple-million-commish day for certain.


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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. At the time of publication, Cramer was long Dow Chemical, Honeywell and Intel. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to jjcletters@realmoney.com. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."

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