Formerly About Advanced Micro Devices Message Board

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Politics : Formerly About Advanced Micro Devices

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To: milo_morai who wrote (100786)	3/29/2000 7:52:00 PM
From: Petz	Read Replies (1) of 1574717

milo, re:<How's the MaxPain No. Derived?> At each strike price, x, starting slightly above the current price, do the following: Count the number of calls at strike prices less than x by checking open interest. Subtract the number of puts at strike prices greater than or equal to x. If this number is POSITIVE, it means that the sum value of puts and calls will be LESS at the next lower strike price, since every call that is "in the money" will be worth $100 less for each point move, and every put thats at-or-in-the-money will be worth $100 more. So at the next lower strike price you repeat the process. Now there will be fewer calls in-the-money and more puts at-and-in-the money. When you reach the point where the latter number is bigger than the former, you stop and thats the max pain point. To be truthful though, you should ignore the open interest on puts and calls that are more than 25% "in the money," because at least half of these will be exercised and the stock not sold (or covered) for quite some time. Here's a URL for AMD option open interest: edreyfus.com Petz

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