• 	OPTIONSMART MORNING UPDATE: Extended losses on profit-taking
  1. OUTLOOK: Declining commodities prices pushed the stock market down. The weakness came despite better-than-expected first quarter earnings and an in-line outlook from Best Buy. There were several economic items out, but none of them had much of a strong influence on trading. After the close Tuesday, Adobe Systems said second-quarter sales and earnings dropped from a year ago. However, the software maker's sales topped estimates and earnings met estimates.Market breadth was negative. On the Nasdaq, decliners topped advancers by more than two to one.
  2. IMPLIED VOLATILITY AS AN INDICATOR: In financial mathematics, the implied volatility is the volatility implied by the market price of the option based on an option pricing model. In other words, it is the volatility that, when used in a particular pricing model, yields a theoretical value for the option equal to the current market price of that option. Implied volatility, a forward-looking measure, differs from historical volatility because the latter is calculated from known past prices of a stock. Usually increased volatility is associated with falling stock prices. But fast rising markets also have a high level of volatility. In periods of quiet trading volatility is low, and aggressive trading may correspond  to a volatility jump. Periods of high volatility are often caused by an emotionally driven market. Emotions, such as greed and fear, can cause stocks to move higher or lower, and change the level of volatility. Fear and greed have an important effect on volatility, because they are two primary factors causing stock prices to change. When important and relevant new information arises in the markets, volatility tends to rise. When information is unexpected, it will have the greatest impact on stock prices, as a result, a stock jumps dramatically higher or lower. The impact of a news event will vary based on its relative importance and the degree to which it surprises investors.
  3. TRADING OPPORTUNITY:  n/a
  4. OUR FREE MONTHLY TRADING RECOMMENDATION AUTO-TRADEABLE WITH OUR PARTNER BROKERAGES: to be published  in June.   It is absolutely free. Open your brokerage account, select OptionSmart as an newsletter publisher and Free Picks as a service. You will have our free monthly pick auto-traded. That's it!
  5. WISDOM NUGGETS:  Some traders consider trading as a sort of gambling. Without planning and calculations, they throw money at the market. They should distance themselves from gambling behavior. Why a scientific approach is applicable? Markets echo similar patterns over and over again. It allows identify reliable trends and select good trading vehicles.
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  June 17th, 2009 at 6:34 am

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