OPTIONSMART MORNING UPDATE: Bounced back on strong data

1. OUTLOOK: The ISM Manufacturing Index for January hit a five-year high of 58.4, which topped the consensus call of 55.5. Investors used the recent selloff as an opportunity to get back into stocks. JMP Securities upgraded Advanced Micro. Signal Hill upgraded Cisco. They believe Cisco's recovery continues to gain momentum and expect the company will return to double digit growth. QQQQQ imlied volatility inched lower to 21.4. U.S. futures point to a higher open.

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2. FEAR METER: QQQQQ imlied volatility inched lower to 21.4.

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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