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Technology Stocks : America On-Line (AOL)
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To: Steve Robinett who wrote (35581)12/17/1999 2:59:00 PM
From: David E. Taylor  Read Replies (1) of 41369
 
Steve:

The AOL curve is actually fairly flat up to 77.5. From 77.5 to 85 the incremental cost of all option contracts is only about $50 million, but from 85 to 95 it's another $200 million. That's certainly enough incentive to keep the price pinned around 85 until the higher priced contracts expire today.

That said, I'm certainly not a devoted believer in the "Max Pain" theory, because external events can blow a stock right past the "max pain" point (check the MSFT chart, MSFT call options contract holders will shell out big time this month). However, I do use it as one input to my trading decisions, particularly the week of options expiration.

David T.
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