OPTIONSMART MORNING UPDATE: Intel provided leadership

1. OUTLOOK: Investors showed little reaction to weaker retail sales for December. Intel shares gained ahead of its results. Microsoft, IBM and Hewlett-Packard were the other big gainers. After the close, Intel announced strong earnings. Both earnings and sales beat estimates and marked a sharp improvement from the previous year. The stock gained 2% in extended-hours trading. Market breadth was positive. QQQQ's implied volatility little changed. It looks like the market needs more positive news to extend the rally.

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2. FEAR METER: 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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