OPTIONSMART MORNING UPDATE: Sunday Edition

1. OUTLOOK: Renewed weakness in the U.S. dollar helped stocks overcome an early slip that followed a lower-than-expected preliminary consumer sentiment reading. Meanwhile, news of a deeper-than-expected trade deficit for September had little impact on stocks. Investors shrugged off some negative data in fear of missing a rally.  Cheap money is seeking a home in equities, and that momentum is pushing the runup. The market is poised to extend rally next week.

.

2. OUR "FEAR GAUGE":  Friday, the NASDAQ implied volatility fell 5% to 22.92 as large traders dumped protective puts . Bullish sentiment still prevails.   

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. This represents a forecast of uncertainty over a specific period of time.

The implied volatility on NASDAQ-100 represents the consensus of option traders’ forecasts for the index volatility over the next 30 days. It is a reflection of fear and greed amongst a wide group of market professionals. It’s not wise to ignore this parameter.

4.  OUR MOST RECENT QQQQ ENHANCED PORTFOLIO TRADES:    

 5. SPECIAL OFFER: n/a

 Learn more about our services and special offers!