re: "MaxPain theory... There is a major flaw, IMHO, in that theory: ..."
and
"optioninvestor.com uses another indicator: the highest OI on a particular strike"
there may be flaws in the MP concept, but I do not believe that is one of them. a MP price is a price in time for the current set of OI... it of course evolves over time. but the 'theory' is that if accurately accounted for on the day of expiration, the MP point should hold.
the biggest flaw in the concept, IMO, is that all writers are the specialists/MM's and buyers are retail... of course, no one ever knows the real mix.
using the highest OI is also fraught w/ 'flaws', since the strike w/ the highest OI can evolve as well, before expiration. but I agree it is a good indicator, in general.
of course, some big institution could have sold all those Calls covered for their holdings as some protection... then they might likely want those calls to expire. |
