OPTIONSMART MORNING UPDATE: Plunged on debt fears

1. OUTLOOK: Fears about the fallout from a growing debt crisis in Europe dragged on Wall Street.A surprise rise in weekly jobless claims ahead of today's non-farm payrolls report in combination with the sovereign debt issue has got investors a bit spooked. Cisco failed to hold early gains after better-than-expected quarterly sales and earnings. 

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2. FEAR METER: QQQQ implied volatility jumped to 23.14. 

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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