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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: Kayaker who wrote (23331)1/18/2002 6:26:05 PM
From: ajtj99  Read Replies (1) of 99280
 
Kayaker, our resident options expert, Mish, has often explained how this works. It is not as easy as the numbers punched in on iqauto.com.

There are numerous factors involved in determining Max Pain, including out of the money options. I trust Mish' eyeball method more than iqauto's automated results.

You also have to understand that Max Pain Theory applies to positions 2-days prior to options expiration, I believe. In other words, to check the Max Pain values, you would have to have checked Wednesday's values for Max Pain before coming to any conclusions.

You also have to be aware of delta hedging, which is what the MM does when the Max Pain point starts to get away from them.
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