OPTIONSMART MORNING UPDATE: Posted solid gain

1. OUTLOOK: Investors sorted through a bevy of reports on jobs, housing and the deficit. Stocks spent the session in a sideways chop, but managed to settle with solid gains. National Semi (NSM) beat estimates. Kaufman raises their Research in Motion (RIMM) Q3 estimates. Needham downgraded Analog Corp. Broadpoint AmTech expects ORCL's database business to rebound. QQQQ implied volatility little changed. QQQQ moved within a very narrow range over the last four weeks (see the chaart). We are not likely to see much of a change in direction for the last few weeks of the year. U.S.futures point to a higher open.

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2. FEAR GAUGE: QQQQ implied volatility little changed. No sign of change in market sentiment.  

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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