OT: The Max-Pain Point™ calculation is an attempt to evaluate whether the open interest, looked at starting one month out from expiry, can be used to indicate where the underlying stock/issue may be on or about expiry day.
I have been tracking a set of issues for several years now and I have found that the best 'indications' are obtained when relatively 'recent' open interest positions are used in the calculation, and the market/issue is relatively stable (no Greenspan, warnings, sudden announcements, etc).
With the January contracts, there is no good way of separating the LEAPS out from the recent contracts, other than looking/guessing at how far away some of the strike prices are from the current price of the underlying issue. With an issue that moves significantly over the year, the LEAPS get offset very far away from the current price esp if there were splits during the year.
In addition and probably most important, is that by the time January arrives, most if not all of the LEAPS have been hedged or offset by the MM's (the writers of the contracts, whomever they are) for many months. Therefore, they would not exert any 'attractive' Max-Pain Point effect on the underlying issue's price.
You can visit my Max-Pain Point web pages where you can find historic January charts/data for the issues tracked.
Ben A.
ez-pnf.com |
