US stocks have tumbled again today in the absence of a deal on the bailout plan.

Andrew Snyder says the current “neck-breaking” volatility creates great profit plays for contrarain investors. He recommends using puts to bet on further downside for Boeing (NYSE:BA).

To hedge, he advises investors buy call options on National City Corporation (NYSE:NCC). This bank has a solid balance sheet and could soar if the $700 billion bailout is passed in Congress.

This from Today’s Financial News:

There is an old adage on Wall Street that says as long as the markets are moving, you can make money. It may be a tired, overused cliché, but boy is it right.

No matter which direction the market heads, there is always a profit opportunity. And with the Dow making huge day-to-day swings, this is a monumental chance for savvy traders.

We have seen “neck-breaking” volatility over the past three weeks. Yesterday’s [Monday] 777-point mega-plunge will go down as one of the worst days in Wall Street history, but you need to look at it as a fantastic gift. After all, shares of thousands of companies are selling at incredible discounts.

There is going to be more volatility over the days and weeks ahead. As Congress debates another bailout package and as news of more troubled firms cross the wires, the equities market will surge and plunge and surge and plunge. Take advantage of the swings and profit with every move.

I have created a hedge-type plan that will allow you to profit no matter which way the market moves. As this market works itself out, it could make you a lot of money. So pay attention.

Market divergence

In the next few days, Americans will begin to realize the truly dire economic situation this country is in. We will read more and more about an impending recession. Share prices of companies that have anything to do with consumer spending will get hit hard.

One company that will be hurt is Boeing (NYSE:BA). The company was doing quite well just a few months ago, but now that a global slowdown is imminent and a lot of its workers are circling the company in a picket line, it is in serious trouble.

Shares have started on a rapid decent and will continue to plunge until this economy rebounds. In the past twelve months, shares are already down nearly 50%, from $107 to just $55. The combination of a strike and a major economic slowdown will drag prices even lower.

Judging by historical trends, trading volume, and valuations, a share price drop to $45 is not only justifiable, it is almost a certainty. With a huge order backlog and creditors nipping at the company’s heals, Boeing cannot afford to have its workers on strike. They need to be on the assembly line pumping out planes.

To take advantage of the impending fall, you have two options. Directly short the company’s shares or take the options route. Since shorting is considered un-American right now, I recommend buying Boeings February 55 Puts (BANK.X).

With a strike price of $55, they are close to being in the money. As share price drops, they will rise dollar-for-dollar. As Boeing drops towards $45 per share, these puts could easily double in value.

Taking a short position on Boeing is just one side of this hedge. Not every company will be hurt by this market downturn, especially if you believe as I do that action from Congress will create a significant, even if short-lived, share price surge.

As I already mentioned, there are a lot of companies unduly discounted by Wall Street’s decline. Many of them are in the headline sector, the financial industry. As companies like Lehman Brothers, Wachovia, and AIG disappear, investors worry if the smaller, regional banks will follow the same path.

Companies like Sovereign Bancorp (NYSE:SOV) and National City Corporation (NYSE:NCC) have seen their share prices destroyed by the negativity. Some of the companies deserve the deep discounting; many others do not.

Catch the rebound and score

National City does not deserve the horrific action its investors have been forced to digest. It does not have the huge exposure to the sub-par mortgage industry that companies like Wachovia (NYSE:WB) have. In fact, its balance sheet is healthier all across the board.

National City records more than $11 billion in cash, with over $7 billion in operating cash flows. It is working to support just $30 billion in debt. Yes, its debt ratios are fairly high, but nothing it cannot work itself out of, especially with the help of an industry bailout. Share price deserved a hit, but not one of this magnitude.

The company’s share price has dropped from over $30 to less than $2 in the past two years. Over the last three weeks it has plunged by over 50%. It is giving savvy investors a shot at some bragging-worthy profits.

To take advantage of the short-term appreciation potential, once again, you have two options. Buy shares of National City, or buy the company’s call options. Either way, you have a shot at triple-digit profit potential.

Buying the underlying shares is simple, but deciding which options to purchase is a bit more difficult. You have to factor in time decay, market volatility, and valuations.

How about I do the hard work for you? Buy National City’s January 2.50 Calls (NCCAZ.X). They will soar on any positive news from Congress.

The markets are highly volatile. If you pay attention and are prepared to act fast, there are some fantastic profit opportunities. When Congress finally gets a bailout bill on the president’s desk, expect some positive action in the financial sector. Meanwhile, the nation’s economy is not out of the woods.

Companies that rely on consumer spending or economic expansion are going to be feeling the pain of a major slowdown for at least another year, maybe two.

Take advantage of the market dichotomy and profit no matter which way it heads.

Source: Volatility Hedge: Short Boeing (BA), go long on National City (NCC)