OPTIONSMART MORNING UPDATE: Posted healthy gains

1. OUTLOOK: Large trades stepped in, despite no clear buying catalyst and an unexpected decline in employment. The market shrugged off a report of an unexpected decline in payrolls. Large tech stocks led the late rally. Palm introduced two phones at the Consumer Electronics Show.  Credit Suisse thinks investors will return to large cap biotech in 2010. QQQQ's implied volatility plunged to extremely low levels. Six S&P500 companies reported quarterly earnings this week, with EPS mostly exceeding expectations. Earnings reports start to pick up next week with Alcoa, Intel and JPMorgan Chase.

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2. FEAR METER: QQQQ implied volatility plunged to extremely low levels.

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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