OPTIONSMART MORNING UPDATE: Gained on positive news

1. OUTLOOK: Stocks sported solid gains for the entire session as a batch of positive news items brought buyers into action. However, afternoon trade became rather subdued as the stock market entered a familiar sideways drift. Barron's reported that Amazon.com s embroiled in a price war on books and DVDs started by its mainly bricks-and-mortar rival. Google plans to begin selling a cellphone directly to consumers as soon as next year. QQQQ implied volatility little changed. The short-term technical chart displays a bullish pattern.

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2. FEAR GAUGE: QQQQ implied volatility little changed.  

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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