Stoxguru - options and expiration day:
There are some explanations:
Peak interest (optioninvestor.com):
Example - QQQ: there are about 385k contracts in open interest on the QQQ, representing 38 mil shares or about $3 bil.
obviously, some of these contracts will expire worthless. But, with a little xtra money some big speculators can place orders (futures or options) that will modify offer and demand on the market, hence move the price of the underlaying.
It is assumed that the Market Makers are the biggest sellers of options.
Peak open interest for the QQQ put is the $77 strike. MMs would like to see the NDX close at 3080 or above (40*77) in order to have these options expire worthless, cashing all the premiums received for the 77 puts and below.
Peak open interest in calls is more fuzzy, as it is for the QQQ 75 strike, but 80-82 are very heavy. So if the NDX closes below 3200, MMs would cash the premiums historically paid when the contract was traded.
Note that MM's already have booked the fees for those 38 mil contracts, about $38 mil., plus all the round-trips that have been unwind before today.
Based on the peak interest rationale, you would expect the NDX to be kept between 3080 and 3200.
Values for SPX: 1400-1400
Values for OEX: 700-740
Peak interest should be used as an evaluation of upward resistances or downward support. Not for guessing the expiration price.
MaxPain tm of BCA-Software: ez-pnf.com
is based on the Dollar value of premiums of the complete open interest at a given date.
QQQ : 79 = NDX 3160 iqauto.com
SPX : 1390
OEX : 734
One might say that:
if there is no surprise from here to expiration (and the market can always surprise), MMs might take positions in order to drive the market close to the above mentionned prices.
Still MMs are not dumb: all possible hedges are been taken care of, they already have booked: their commissions, the time decay, and the full premiums of OTM options that never will be closed. So, if they would inluence the markets, this would be with little conviction.
IMHO, peak open-interest and MaxPain better work with some particular stocks, not all, not always.
I observed a good correlation in sideways markets as the 1999 Mar-Sep timeframe.
Anather indicator is the daily vlume on options, but there is no way to tell if the volume represents positions that are close or new ositions.
Tody's highest volume was for the QQQs:
puts 74 = NDX 2960
calls 80 = NDX 3200
Today's volumes for the Dec QQQ options: (these are new positions)
8k puts 72 = NDX 2880
5k calls 80 = NDX 3200 |
