OPTIONSMART MORNING UPDATE: Awaiting jobs report

1. OUTLOOK: Stocks struggled, as two-session advance lost steam after a weak reading on the services sector of the economy and a mixed reading on the labor market unsettled investors. Large traders are looking for more indications that a recovery is taking hold, after pushing stocks higher last year in anticipation of such a rebound. After the close, Cisco Systems and chipmaker Novellus reported better-than-expected quarterly sales and earnings. The technical chart looks very bullish in the short term.  U.S. futures point to a lower open.

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2. FEAR METER: QQQQ implied volatilty inched lower.  

About Implied Volatility.  Investor fear and greed play a significant role in financial markets. The question is, how can investors measure market sentiment in an emerging market situation? How can they gauge the fear? Volatility is a well-known measure of risk in financial markets. When volatility is low, there is a lack of fear. High volatility, however, suggests a fearful markets. Volatility can be calculated in two ways. Either from historical stock price data or from current option price data. Using the second method results in an implied volatility measure. It is a reflection of fear and greed amongst a wide group of market professionals. It’s not wise to ignore this parameter.

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