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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: RP Svoboda who wrote (2772)10/17/2001 10:27:56 PM
From: Dan Duchardt   of 5205
 
Boda,

MaxPain is a dollar value calculation that takes into consideration all of the open contracts at all price levels. As you look at the numbers on that site that shows the MaxPain result, one thing to keep in mind is the change in dollar value of the stock that is needed to move the closing price to the MaxPain point. For a large cap stock, that can be huge compared to the dollars involved in the options. I think that is why you don't usually see MaxPain causing a move more than one strike in the closing week, even if MaxPain is far away.

Assuming there are those with the power to move the market you can be sure they are not going to put themselves at risk of taking a loss on the underlying to wipe out those outstanding option contracts. The thing that is really hard to know is if they can take it back up to 50 and profit in the process. If today's atmosphere persists, you should do fine. It's just hard to tell from one day to the next these days.

Dan
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