Laura,
the Max-Pain effect is a second order effect ie other more direct forces like earnings reports, breaking news, Tom Kurlak, Greenspan, plain old momentum, etc can swamp out the natural 'attractor' price that the Max-Pain analysis tries to calculate.
Now last month LU was riding a wave of momentum and, as you can see from last months graph, momentum swamped out the Max-Pain point. This month, the momentum has lowered and no great big break news stories or up/down grades were made and LU seemed to be attracted to the Max-Pain point. DELL, on the other hand, is not following any logical rules except momentum and pre-earnings run up, right now. It blew away the MAx-Pain effect. Perhaps, in the coming months, it too will settle down and the investor/trader will be able to get a hint of where the stock price may be on expiry day.
That help?
Ben A. |
