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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: orkrious who wrote (155156)3/9/2002 5:53:00 PM
From: jjs_ynot  Read Replies (1) of 436258
 
I have done a statistical analysis of Max Pain.

I performed a paired test of stocks within the Nasdaq and Russell (large and small cap) with the largest outstanding open interest relative to daily volume. I selected one stock above Max Pain and one below Max Pain ranked by the open interest metric.

To a statistically significant level (alpha = .05 , i.e. 95 percent confidence) the stock prices moved together. That is the price above max pain or price below max pain moved up. This did not work when the deviation of one or the other was more than 4 strikes from max pain.

Regards,

Dave
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