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Tuesday, January 26, 2010

Traders expect stocks to crash

This week's decline in U.S. stocks has prompted institutional option traders to position for a more substantial pullback in exchange-traded funds covering the consumer, materials, banks and retail sectors.

After a positive start for the year, a sudden three-day reversal on Wall Street has raised the specter that a larger technical downside correction, perhaps of a magnitude of 20 percent, is looming in the first quarter.

Market participants noticed a burst of nearly 400,000 contracts traded in downside.

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