Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 262.92

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3:59 PM EST

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To: Gottfried who wrote (58745)	1/14/2002 10:34:48 AM
From: LemurHouse	Read Replies (2) of 70976

Interesting chart, thanks. I wonder if the correlation is due to the (hypothetical?) validity of the max pain theory, or simply the result of the predictive nature of the options market. I.E., if one accepts that options trading will react to the price of the underlying and the market in general, then the max pain point will presumably move over time, in relation to the volume of options trading and to the movement of the underlying. The max pain point that is indicated 30 days before expiry, might be considerably differrent than what is indicated the day before expiry. In such a case, is the price of the underlying being driven towards max pain (as appeared to be the case last month), or is max pain simply moving as a result of options trading activity, and gravitating naturally towards the price of the underlying at the expiration date? If its the max pain point that's moving more than the underlying, then max pain would seem to be less useful as a predictive instrument, except perhaps on the expiration date itself. Does anyone know if this has been measured?

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