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Technology Stocks : IBM
IBM 309.24-0.5%Dec 12 9:30 AM EST
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To: Marty who wrote (3187)6/2/1998 7:58:00 PM
From: Ben Antanaitis  Read Replies (2) of 8218
 
Marty,

I only use the Max-Pain study to get a clue where the stock price might be on expiry day.... I do not try to 'understand' where the option prices are going.

RE change day to day. Yes but only minutely because it is based on the value of the entire spectrum of IBM open interest for that month and it's calculation. That's thousand of contracts at various strike prices and as the month goes on an inertia builds up. To effect a change in the Max-Pain would require a vast amount of contracts. And please remember that some (lots) of the contract writers are betting that the price ends up so that the contracts never are in-the-money'. They don't care where it ends up, just so long as it is not exercisable for them at that price, eg covered calls and naked puts.

Ben A.

ALL: Please note that the Max-Pain study and the EZ-PnF charts I post are for information only and not to be considered investment advice.
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