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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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ajtj99
da_spot
To: da_spot who wrote (35100)8/27/2021 4:43:12 PM
From: Lee Lichterman III2 Recommendations   of 97963
 
I just ignore everything far away from current price. Pay attention to the 10-20 strike prices around where it's trading. Now look at open interest. You'll see a lot more puts than calls for a range then it will swing the other way where there's more calls than puts. That point is USUALLY the max pain. Exception is if at that switch, volume is waaay down.
Example of exception... Say there's 10,000 puts for each strike below 50 and only 500 calls. At 51 to 55 there's 200 calls and 50 puts puts then at 56 there's 500 calls and 400 puts, then at 57 and higher 10000 calls and 1000 puts. They would probably go ahead and take it up anywhere over 50 but under 57 even though there's more calls than puts from 50-56 but not enough to add up money wise. They just don't want it over 57. They would probably whipsaw it around in those low 50s to clean those out and could land anywhere in the range at the end.
I probably shouldn't have brought that up and confused you since it doesn't happen often but I do see it from time to time. Some stocks have all around low option volume so max pain doesn't work well.
Most of the time though volume is highest at max pain and the line is clear where the switch over is.
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