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Technology Stocks : America On-Line (AOL)
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To: Steve Robinett who wrote (29673)8/20/1999 4:51:00 PM
From: Time Traveler  Read Replies (1) of 41369
 
Consider a company with the following strike prices, call volume, and put volume:

$10, 2, 3
$15, 6, 7
$20, 4, 5

And the price closes at $17.

Investors holding CALL10 would get 2 * ($17 - $10) = $14.
PUT10 would return $0, expired worthless.

CALL15 would return 6 * ($17 - $15) = $12.
PUT15 would still expire worthless.

CALL20 would expire worthless as well.
PUT20 would return 5 * ($20 - $17) = $15.

The total amount the investors get would be $14 + $0 +$12 + $0 + $0 + $15 = $41.

You can do this for all the closing prices. The closing price that returns the lowest amount would be the MaxPain point. That is the way I interpret it. Am I wrong?

Notice today's volume is another low one. If there is one manipulator, it is likely the price would close at the highest number of contracts. If there are quite a few manipulators, it would explain why the price is attracted by the MaxPain point. They were fighting against each other. Did we close at the MaxPain point today?
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