OPTIONSMART MORNING UPDATE: Finished in the red

1. OUTLOOK: Tech stocks fell after cautious outlooks from Qualcomm and Motorola. There is a sense that the market got a little ahead of itself. Weaker-than-expected economic readings on durable goods orders and unemployment were also in play. Later in the day, Fed Chairman Ben Bernanke was confirmed for a second term. After the close, Microsoft and Amazon reported higher quarterly sales and earnings that beat estimates. QQQQ implied volatility jumped in early trading but faded before the closing bell. U.S.futures point to a weak open.

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2. FEAR METER: QQQQ implied volatility jumped in early trading but faded before the closing bell. 

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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