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Strategies & Market Trends : Bonds, Currencies, Commodities and Index Futures
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To: stock2005 who wrote (7957)10/13/2005 10:12:28 AM
From: Real Man  Read Replies (2) of 12411
 
Max pain trades are usually pretty reliable, but not as good
as the spiral. I've been trading them in the past, but I'd
place the odds at about 80% that it works : 20% that it doesn't.
However, the odds have been worse in the bear market.
If max pain does not work, and options remain out of whack into
expiration, it is usually a good bet that the market will reverse
after expiration, at least for a short term (a day or two).

It works well for major stock indices, but it may not work
for minor ones, such as XAU. It has to do with the size of
the derivatives market relative to underlying market. For
stock indices derivatives appear to be important. Not so for
the XAU. Derivatives are important for gold, though.

That said, I don't like this market for a long position at
this point. Gut feeling.
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