OPTIONSMART MORNING UPDATE: Sunday Edition

1. OUTLOOK: RIMM and ORCL both announced earnings results that exceeded analysts' expectations. The positive surprises helped bring buyers back into the action after they had stepped to the sidelines in the previous session's sell-off. QQQQ implied volatility plunged as large traders dumped protective puts and bet on the upswing. The Commerce Department will release its final revision of third-quarter GDP before the opening bell Tuesday.  Government figures on personal income and spending in November come out in the Wednesday morning. The market may also look to the dollar for direction. It's likely to be a quiet week. Many market players are on vacation and traders will be  focused on defending this year's gains. 

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2. FEAR GAUGE: QQQQ implied volatility plunged to 52-week lows as investors turned bullish.  

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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RIMM (Research in Motion) Jan 55/60 debit call spreads were bought @3.80 to bet on the earnings report to be released after hours Thursday. RIMM posted quarterly results that surprised analysts and jumped 12%  next day. Our subscribers got a nice 12% gain today, right after the opening bell. This is how it works! Take advantage of very short-term Momentum Plays!

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