Paul, ***OT***
Max-Pain is a study to try to determine where the stock price may be on expiry day. I do this by analyzing the current total open interest value Vs the range of possible stock prices on expiry day. The value of the open interest is 'easy' to calculate and tabulate, based on expiry day, because all the time premium is out of the picture. I do this work 'by hand' for all the issues in the study.. Max-Pain consumes my Friday evenings just as it is.
But more directly to your question... to do as you suggest, it would take some form of trade-by-trade tracking/recording system to get the data required. Volume is not small in some of the stocks in the study ie DELL, LU, IBM, really anyone who has a 'volatility' factor. (eg yesterday DELL traded 2635 $80, 7977 $85, 6274 $90, 1684 $95 in just the call contracts.).
I am not in a position to attempt this, from a personal time or personal cost perspective. I'm also not sure what you really would get as a result since one MM might be in one trading position and another would be in a different one ie long, short, covered, naked, opening a position, closing a position, rolling out a position, unwinding a position, etc.
My hope for the Max-Pain study is to determine if we, the investing public, can get a gauge of where the stock price might be on Expiry day, based on the open interest valuations. Note that I post the final Max-Pain graph 5 business days before the expiry day. I then overlay where the stock actually closed on expiry day on the 'final' Max-Pain graph. This is what the 'history' graphs show... where did the stock close, overlaid on the Max-Pain graph derived 5 business days before.....
I kind of rambled here, have I answered your question?
Ben A. |
