The Criminal Mind
I hope we have determined this is a sideways market cause it sure seems like one to me. Tippet said P/C ratios are meaningless. Well they are IF we are strongly trending.
I see no trend here.
In a sideways market Max Pain seems to work very well on average.
In a strongly trending market P/C ratio is meaningless because of delta hedging. As long as people are running up the prices of stocks, the number of calls is meaningless as the sellers of those calls have to go long as a hedge (and the puts expire worthless).
As long as people are buying puts (and the market is going down), the sellers of puts have to hedge by going short (further driving the stocks down) and the calls expire worthless.
In a sideways market, the crooks will drive stocks towards max pain so they can collect both halves of the "options pie".
Equity Calls have increased to absurd levels.
QQQ or index puts appear to have been used as a hedge or just by those who think we are headed down, and thus are relatively high.
The criminal mind wants to know how the crooks can make the QQQ puts expire worthless, as well as the QQQ calls, and all the equity calls people have been buying as well. Since the ratio of equity puts is small, that seems to me to be the "smart money" right now.
Well looking at the options chain, there are huge numbers of MSFT puts and Calls at strike 70. This is interesting. Max pain appears to be 70 (to my eye anyway) so MSFT puts do not seem to be such a great idea.
QQQ max pain(to my eye is 40, perhaps 39).
So QQQ puts may be profitable, as might a QQQ short, but probably not as rewardable as selected equity puts or shorts.
Remember the criminals want to peg the QQQ nearly where it is and tank the high fliers like BRCD etc. So.... Rally MSFT, rally selected garbage and possibly rally bios. That will prevent the QQQ's from collapsing too far.
But there are insane numbers of CALL positions on the following stocks with relatively little put interest.
BRCD BRCM KLAC
I fully expect those to tank while they prop up the index with MSFT (possibly INTC, SEBL, possibly QCOM, bios and other unknown garbage).
Based on Call positions and intrepretations that we are indeed headed towards max pain (A hypothesis that could be wrong) Here are my targets
BRCD: 35 possibly 30
BRCM: 45
KLAC: 55 possibly 50
CSCO: 20 possibly 17.5 (most likely in between but no more than 20)
INTC: very tough. INTC will close on an exact option point but that point is unknown. The likely targets are 35 32.5 or 30. I am willing to rule out 30. That leaves us with 35 or 32.5. To prop the QQQ's up it could be the higher number. So INTC might not be the most profitable short here, but it could also be one of the safest. I sincerely doubt INTC closes above 35 based on huge call position at that strike.
Best guess 32.5 on the nose. Second guess 34.98 on the nose.
MU: bears love shorting an putting this sucker but it might not drop much. They may need it to prop up the SOX so it does not fall too far and there are reasonable numbers of bets against it. Targets are 32.5 possibly 30 but I doubt the latter.
JNPR: fair number of bets against this pig. Can it possibly rally if we drop? I doubt it but here are the targets. 22.5 and 20. Thus there should be better plays should my theory pan out.
SEBL: small option interest compared to the biggies like INTC CSCO MSFT.
They could use this favorite to help keep thing afloat. Target anywhere between 30-35. Thus there are better opportunities.
AMZN: A bold prediction here. 10.0 On The Nose
EBAY: 65 possibly 60
VRTS: 45 possibly 40
EMLX: 45 possibly 40 but relatively low option interest and a "darling at the moment so less likely to tank possibly.
QLGC: 55 possibly 50
QCOM: can this really rise? That is what I see. targets 50-55. This will help prop up the index if they can pull this off.
Favorite shorts in the group
BRCD BRCM VRTS KLAC AMZN
Good luck. This does depend on us sinking into expiry.
If that does not happen, the alternate scenario is delta hedging rally to absurd heights. Be careful.
M |
