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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: ajtj99 who wrote (63899)5/8/2002 2:03:58 PM
From: Carl R.  Read Replies (1) of 99280
 
While thinking about Max Pain in terms of market maker manipulation is a useful memory device, it actually has nothing to do with the underlying cause. Professional option writers dynamically hedge their positions so that they make money regardless of the behavior of the stock, except in the case of large gaps. As expiration approaches, they have to unwind their positions to stay properly hedged. It is this unwinding that is the primary cause of the move in the stock, not any insidious manipulation, though moves in the last few minutes could be manipulated.

Carl
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