OPTIONSMART MORNING UPDATE: Posted gains in thin trading

1. OUTLOOK: Investors were generally pleased by the latest data on labor market, new home sales and consumer spending. Most economists believe the recession is over. JMP Securities raised their NVIDIA. Jefferies expects internet retailers to show positive Y/Y growth this shopping season with Amazon, eBay and Google likely to benefit the most from this trend. The techncial chart looks very bullish in the short term.  However, today's market sentiment  will be damaged by news from Dubai. Asian stock markets mark steep losses, amid fear of effects of Dubai's debt problems, with Hong Kong's Hang Seng plunging 3.5%. 

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2. FEAR GAUGE: QQQQ implied volatility plunged to 18.8 (below 52-week lows) as recovery fears fade away.

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.

4. WISDOM NUGGETS: Hope, fear and greed are not strategies: they are emotions. Simple emotions are not an effective strategy. Positive emotions could cause us to fail to apply riskprecautions.  Negative emotion could cause us to hesitate.   

5.  MOST RECENT MOMENTUM PLAY:  HD Jan 24/26 Debit Call Spread - Bought @1.4827 on 11/17/09 and sold @1.64 on 11/23/09 with an 11% gain in six days! 

FROM THE TRACK RECORD: Average 12% gain per trade (10 days long) with a 100% success ratio (49 of 49) since Jun 30, 2008.

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