Friday’s punitive stock-market decline wiped out the New Year’s rally and then some, challenging the arrant complacency that has ruled Wall Street of late with a steady drumbeat of unsettling news. Much of it emanated from Iran, which threatened to choke off the world’s supply of crude oil by reducing OPEC’s output. Energy prices soared, in line with our prediction here a while back that spot crude would challenge last August’s highs near $72. The February contract need only have surpassed $68.44 to all but guarantee this, but in the event, it reached $68.80, closing at $68.45.

Teheran also announced that it has begun pulling money out of European banks ahead of possible U.N. sanctions over its nuclear program. (Another unanticipated setback for the multitudes who have been betting against the dollar?) These two body blows sent U.S. investors reeling. Although earlier in the week bulls had ratcheted up obliviousness to the threshold of hubris, shaking off punk earnings news for Q4 and incipient panic in Tokyo markets, Friday’s geopolitical tidings overwhelmed buyers with sheer tonnage.

We were among those who bought into the session’s steepening decline, but our position allowed us to do so profitably and with no anxiety. We’d held a bushel basket of Feb 40 QQQ puts at the outset, and they nearly tripled in price over the course of the day. If we had sold them at their highs the profit would have been $1,600. Instead, we shorted Feb 39 puts for the same price we’d paid for the Feb 40s, effectively legging into a $1 vertical put spread for no cost. We stand to make as much as $6,400 if stocks fall moderately between now and February 17, with almost zero chance of loss. Not bad odds – and a great way to enhance our objectivity if stocks should continue to fall.