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Politics : High Tolerance Plasticity
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To: chowder who wrote (15207)7/18/2002 11:23:03 AM
From: Warpfactor  Read Replies (4) of 23153
 
Dabum,

I've read some discussion on "Max Pain" theory, although I do not know what "Max Pain" refers to.

As I understand, every month options expire on a given Friday. If you look at the open activity for QQQ and SPDR, and a few other key indices, you will find a cluster of activity around a certain strike price.
According to what I've read, the markets will tend to gravitate to that strike price by expiration Friday, engineered there either consciously or unconsciously by the powers-that-be.
Once in awhile, like last month, the QQQ had traded so far below the level of highest activity, that the big boys just had to take their lumps and cut bait. But most of the time, this theory holds true.

Is that a proper assessment of options week activity?

Warp
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