OPTIONSMART MORNING UPDATE: Plunged on China jitters

1. OUTLOOK: Stocks tumbled again after China reported stronger-than-expected fourth quarter GDP growth and a sharper-than-expected spike in inflation. Tighter policy in China would presumably slow the global economic rebound. EBAY jumped on stronger earnings. After the close, Google reported a big jump in revenue. Shares lost 4% in a "sell the news" reaction. Starbucks reported higher quarterly sales and stronger earnings and gained 2% after hours. U.S.futures point to a higher open.

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2. FEAR METER: QQQQ implied volatility inched higher as large traders were buying protective puts . 

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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