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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: M. C. Orme who wrote (49)	4/19/2001 2:10:47 PM
From: Uncle Frank	of 5205

>> I would appreciate someone explaining to me or directing me somehwhere that I may find an explanation of Maximum Pain that is easily understandable. I can't seem to grasp the concept and how it relates to expiration and price movement. MaxPain is based on the old saw that most options expire worthless. They analyze the open contract positions on the entire range of options for a security, both puts and calls, and then compute the price of the underlying stock at expiry which would result in the greatest cumulative loss for all derivative holders. That becomes the max pain point. Since it ignores news, earnings releases, fed rate decreases, etc., it isn't very reliable, but it's fun to look at. This link takes you to a more complete description: ez-pnf.com and this one computes them for you: iqauto.com Note that for sebl, April's Maximum-Pain Theory Value is 35, and qcom's is 55. uf

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