Hi Greg,
Since January options expiry is just two weeks away, I just finished looking at all the stocks in you current list, and compared them to their "Max Pain" point. Most of them are currently trading very close to their Max Pain strike, with five notable exceptions:
BRCM: Last close at $87, but the Max Pain point is at the 115 strike. This represents a 32% difference. The dollar amount of the contracts which will not expire worthless if BRCM reaches expiration at 87 is $794,514,000. This represents 9,132,345 shares controlled, or 81% of one day's trading volume in BRCM (based on the 10 day average trading volume).
EMC: Last close at $64.3750, but the Max Pain point is 67.5. This represents only a 5% difference. However, the dollar amount of the contracts which will not expire worthless if EMC reaches expiration at $64.3750 is $685,972,625. This represents 10,655,885 shares controlled, or 65% of one day's trading volume in EMC (based on the 10 day average trading volume).
ORCL: Last close at $30.1250, but the Max Pain point is 22.5. This represents a -23.5% difference. The dollar amount of the contracts which will not expire worthless if ORCL reaches expiration at $30.1250 is $1,766,171,300. This represents 58,628,093 shares controlled, or 146% of one day's trading volume in ORCL (based on the 10 day average trading volume).
QCOM: Last close at $73.0625, but the Max Pain point is 67.5. This represents a -8% difference. However, the dollar amount of the contracts which will not expire worthless if QCOM reaches expiration at 73.0625 is $1,235,680,750. This represents 16,912,654 shares controlled, or 104% of one day's trading volume in QCOM (based on the 10 day average trading volume).
JNPR: Last close at $109.8125, but the Max Pain point is 135. This represents a 23% difference. The dollar amount of the contracts which will not expire worthless if JNPR reaches expiration at $109.8125 is $598,351,500. This represents 5,448,847 shares controlled, or 28% of one day's trading volume in JNPR (based on the 10 day average trading volume).
So, these stocks, when ranked according to the absolute value of the discrepancy between the current price and the Max Pain price, are:
BRCM: +32%
ORCL: -23.5%
JNPR: +23%
QCOM: -8%
EMC: 5%
However, when ranked inversely according to the "pull" exerted because of the volume of shares controlled, relative to the average 10 day volume, these are:
JNPR: 0.23 days volume
EMC: 0.64 days' volume
BRCM: 0.81 days' volume
QCOM: 1.04 days' volume
ORCL: 1.46 days' volume
I'm not entirely sure what to make of this. I did this just to see what happens to these stock prices over the next two weeks. If nothing changed in the options pits, then these stocks should gravitate towards (i.e., be manipulated towards) their Max Pain strikes, with a force directly proportional with how much is at stake, and probably inversely proportional with how much the stock must move relative to the average daily volume (i.e., if it takes enormous volume to manipulate the stock to the desired price, that should be harder to do, compared to if it only required a small amount of volume to get the stock at the desired price). This latter, I think, you can get a rough idea of by examining the lists above. I'd say ORCL, QCOM, and JNPR will have the most "push", since they have the farthest to go.
But of course, there will be lots of trading between now and expiration. So, I'm hoping to update these figures at least once between now and expiration.
The purpose here is to try to see how the extent of the deviation away from the Max Pain point relates to the stock price move during the last two weeks before expirations, and particularly to see if this is a function of the amount of shares at stake relative to the average daily volume.
My take is that JNPR and BRCM will move the most, because they have the farthest to go, and the amount of shares involved makes it reasonably "do-able," at least to move these stocks part way. So, if this is true, then over the next two weeks (again, neglecting for the moment the fact that there will be further options trading in the next two weeks, and the Max Pain points may change somewhat, all of which will have to be factored in), then BRCM and JNPR would be expected to move up 20%-25% over the next two weeks.
I realize this sample is small, but it might be illuminating anyway.
Let me know what you think,
T |
