OPTIONSMART MORNING UPDATE: Bounced back

1. OUTLOOK: Stocks jumped on strong buying interest. Analysts are very optimistic about today's Intel's earnings report. Telecom was the only sector that failed to find positive ground. Google shares were little changed after the Internet giant threatened to pull out of China due to reported cyber attacks and attempts to access the Gmail accounts of human rights activists. QQQQ's plunged again as bullish sentiment surfaced.

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2. FEAR METER: QQQQ implied volatility plunged again as fears faded away.

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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