• 	OPTIONSMART MORNING UPDATE: Sunday Edition
  1. OUTLOOK: The NASDAQ was able to log its eighth straight gain. Better-than-expected earnings impressed investors. Nevertheless, the market is approaching the top of a trading range. The market is likely to pull back soon, even as the economic news improves. However, after that pullback, stocks should resume the advance.
  2. TRADING OPPORTUNITY: n/a
  3. OUR FREE MONTHLY TRADING RECOMMENDATION AUTO-TRADABLE WITH OUR PARTNER BROKERAGES: to be published  in Aug. Our most recent Free Pick: QQQQ Sep 34/36 Debit Call Spread: Bought @1.32 on 06/22/09 and sold @1.46 on 07/16/09 with a 10.6% in 24 days!   Free Picks Track Record
  4. WISDOM NUGGETS: Ignore Implied Volatility at Your Own Risk Option traders must keep an eye on implied volatility. It is a forward-looking measure that differs from historical volatility because the latter is calculated from known past prices of a stock. The implied volatility of an option is the volatility implied by the current market price of the option based on an option pricing model. In other words, it is the volatility that, when used in a particular pricing model, yields a theoretical value for the option equal to the current market price of that option. Implied Volatility greatly helps to estimate the underlying asset's possible magnitude of move to either direction. The higher the Implied Volatility, the more the stock is expected to move. The lower the Implied Volatility, the more stagnant the stock is expected to be. In reality, implied volatility reflects a market maker's assessment of public expectations regarding events that might change the value of an option. At this time, the implied volatility hit yearly lows as bullish sentiment prevails  (see the chart above). However, volatility has hit a bottom and there is no room to slip further.   This fact clearly indicates that a pullback is very likely (see our OUTLOOK above). Learn more about implied volatility and find out how to use this unique indicator in option trading. To make money in today's stock market you need more than charts and fundamentals. You need to recognize the market game played by the large traders and to take advantage of the resulting short-term opportunities.
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  July 18th, 2009 at 2:49 am

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