OPTIONSMART MORNING UPDATE: Sunday Edition

1. OUTLOOK: Trading volume in the abbreviated was very light. The news of Dubai was the primary focus for the entire session. Updates for the progress of "Black Friday" promotional sales were secondary. However, the reaction to the news of Dubai has been weaker than expected. Apple will start selling its iPhone in South Korea Saturday. QQQQ implied volatility jumped 3.3 to 21.3 but the technical chart still looks bullish. This week brings important readings on manufacturing, housing and the labor market, with the big November jobs report. There are only five weeks left in the year and we are likely to see a move up.

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2. FEAR GAUGE: QQQQ implied volatility jumped to 26 in early trading. Dubai fear will fade away soon and QQQQ implied volatility will slip again. 

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: Don't be a hero. Don't fight the trend. Follow the money flow.

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