IF YOU'VE BEEN frustrated by the markets this year, you're not alone. Amid the uncertainty of a presidential race, an interventionist government, credit turmoil and growing inflation, volatility in the market has spiked. Unless you've been wise enough to be sitting on the sidelines, it's simply been a tough year to make money.

In equities, all major U.S. stocks indexes are sharply lower, with transports and biotechs among the few sectors actually posting gains. Of the many international stock indexes tracked by The Wall Street Journal, virtually all are lower by double-digits this year, save for Venezuela, which is ruled by a socialist dictator who has stolen property and jailed journalists.

The dollar, which had been sharply lower, has now staged its biggest rally in decades to post a slight gain year to date. We've seen stocks like Freddie Mac fall 90% and rally 138% in one year's time. Or natural gas rally 70% only to fall 50% in less than two months' time. It's been a strange year in which everything has worked but nothing has worked.

After a successful first half, I've taken some lumps as of late. And even after trading professionally for over a decade, the emotion of losing money still hurts. After all, nobody forces us to make any investment; losing trades are ours alone. It's the stuff massive shame spirals are made of.

Begin recovering by quelling emotions and letting yourself off the hook. This is a year that has humbled even the most hardened professionals. Every Lipper mutual fund average is down year to date, and hedge funds, run by many of the world's most experienced investors, are having their worst year in over a decade.

I don't advocate waking up one morning and liquidating an entire portfolio. Just as with buying a stock, I believe you should take cues from the market as to getting out as well.

So if I buy XYZ at $50, I'm going to at least hold it until a $45 stop-loss (minimum 10%) is hit, even if my gut tells me to exit the market altogether. Once a bet is made, once you've anted up, you're best served by playing the hand through rather than folding before you even see your cards.

Oftentimes that means sitting and waiting on stocks that have fallen from my purchase prices, but not yet far enough to justify getting out of the trade. For example, before global equities fell, I'd been enthusiastic about the prospects for Japanese stocks given their low expectations and quiet outperformance. Of course, these have sunk along with stocks around the world.

And while I continue to hold names like NTT DoCoMo, Nippon Telegraph & Telephone, Kubota and Hitachi, I won't add additional exposure until the general trend of the Nikkei 225 resumes an upward climb. Same goes for the South African rand or other investments in which I currently have an interest. Before I'm bullish for the long haul, I've got to see some encouraging price action in the here and now. Right now it's nowhere to be found.

Certainly not in commodities, where a crushing summer selloff has signaled a major change in what had been one of the market's strongest and longest-held trends.

Both gold, which I wrote about in May and oil, discussed last month, have fallen into bear-market territory. Underlying stocks like Barrick Gold, Anglo American, Exxon Mobil and BP are among the market's weakest equities.

So much for the leftist conspiracy theory that big oil and commodity funds can manipulate the price of crude, eh?

Even when the market does manage a rally, it's simply not the commodity names leading the charge. Let the bottom-feeders buy falling knives for the long term. My strategy is to focus new money on timely ideas, so commodities aren't currently an area in which I'm looking at expanding my risk.

What's making the current environment so difficult is that so many of the old rules aren't working. For example, even amid a collapse in energy prices, global stocks have also fallen, with decreased inflationary fears doing little to inspire higher valuations for equities. Previously, the market would have a tendency to rally when energy prices dropped.

Also, a drop in Treasury yields hasn't resulted in a lower dollar, as had previously been the market's primary trend. Treasury yields have dropped from over 4.2% this summer to less than 3.7% today. In prior years, lower yields would have sent the dollar down as investors bought competing currencies with higher yields. The dollar and yen, which had previously moved conversely, are now very much in tune.

What Higher Rates?

* 3-month chart of CBOE 10-Year Treasury Yield

By now it's more than obvious that the seasons have changed and the old rules are no longer working. Until we figure out what the new rules happen to be, best to keep your bets reasonable and stops tight.

Have Currency ETNs Jumped the Shark?

Money has poured into China, India and South Korea over prospects for regional growth. As evidenced by the performance of many of their equities markets, that growth would appear to be, at least for now, on hold.

Those interested in an alternative approach might consider a new exchange-traded note that doesn't follow that region's stocks, but rather seeks to track the return of money markets denominated across the currencies.

The Barclays GEMS Asia 8 ETN allows investors to own a basket of eight Asian emerging market currencies ranging from the Indonesian rupiah to the Philippine peso. Each is weighted at about 12%, and the average yield amounts to around 4.5%. In addition to the income generated from the strategy, the note will rise and fall based on the movement of the underlying currencies relative to the U.S. dollar. Essentially, it's as if you invested in a foreign money market.

While I applaud the continued innovation in this previously overlooked asset class, I fear the timing is a little off. After a half-decade downturn, the dollar is in the midst of a substantial rally fueled by, among other factors, the aforementioned collapse in energy prices. It rests at multimonth lows against the British pound, Swiss franc and other major currencies, save the Japanese yen. For now, this might be one to watch rather than one to buy.

Six Degrees of Covered Calls

It's a well-known fact that roughly 85% of listed options expire worthless. Covered-call techniques, which have gained in popularity ever since the 2001 bear market, aim to take advantage of that reality.

In a weak market, the premiums earned by selling calls can offset some of the market's decline. The CBOE's Buy-Write Index, which tracks the performance of a covered-call strategy against a long portfolio of stocks in the S&P 500, is outperforming the S&P 500 by nearly 8%. About $30 billion worth of investments have been put forth into the strategy since the CBOE launched the index in 2002.

Nothing Wrong With Buy-Write

* Year-to-Date Buy-Write Index on the S&P 500 vs. S&P 500

To further exploit the strategy, CBOE is now listing index options based on the Buy-Write Index. Essentially, this new option allows you to buy or sell an option on an index whose strategy involves selling options on stocks. It's an option on an option-selling index.

At the most basic, selling covered calls on the BXM itself would establish an even more income-heavy exposure to large-cap stocks. Hedging through volatility and not asset class (bonds/stocks) could be the new face of "balanced" funds.

Off the Shelf

Mohamed A. El-Erian's got the Harvard pedigree, the Pimco power and a chic international name.

He's also author of "When Markets Collide," a provocative and insightful new book that's worthy of a read from those burned out from the usual "10 Easy Steps to Wealth" that occupy too much of the business section at Borders and Barnes & Noble.

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