One trade that didn't work last year is small caps, and options traders are betting the downturn will continue.
According to a popular Wall Street theory and the Stock Trader's Almanac, small caps tend to outperform large caps beginning in mid-December. However, on December 17th, the Russell 2000 index entered bear market territory, sinking 20 percent from its all-time high hit in late August. Since then, the index is down another 5 percent.
While 2018 marks the index's worst year since 2015, options traders believe small caps could plunge even further.
"This is a very inexpensive trade" Najarian said on Thursday's "Halftime Report". "I'll be in these puts for just a very short time, about two weeks," he added.
These puts expire February 1st and Najarian thinks they should "perform very nicely" if the ETF trades lower to around $125.