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Strategies & Market Trends : Jim's Nasdaq100 Special as a basket. -- Ignore unavailable to you. Want to Upgrade?

To: jjs_ynot who wrote (1428)	10/26/1999 9:51:00 AM
From: Matthew L. Jones	Respond to of 2103

He would probably be better able to explain it than me, but I'll tell you how I use it. MAXPAIN is a concept that for some "mysterious" reason coming into options expiration (3rd Friday of each month) the underlying stock (or possibly index tracking stock) moves to a level so that the maximum number of long option contracts (call and put contracts) expire worthless. Some attribute this mysterious phenomenon to "market manipulation". I may be naive but I attribute it to the natural move in the markets as option sellers (primarily market makers) offset or hedge their option shorts in the equity market. Now, to my use of OX's numbers. If my interpretation of this phenomenon is correct, then the "Maxpain" number works much like a leading indicator for the stock itself-- not only for the last week of the option cycle (although that is when the correlation is the strongest), but also throughout the month as option market makers reduce their short exposure in the equity markets. So, having said all of that, I use OX's computer scanned Maxpain numbers as another indicator to help me predict market direction. When it is the most valuable to me, would be when their is a big divergence between the direction call of the Maxpain and some of the other market indicators I watch. At some point, they will all go the same way again and it might just give me an early signal. Hope this helps somewhat. I'd still ask OX. Matt

To: jjs_ynot who wrote (1428)	10/26/1999 11:38:00 AM
From: OX	Read Replies (1) \| Respond to of 2103

Matt is correct in saying "as another indicator to help me predict market direction". For now, this is how I would use the "Top Ten MP", until someone figures out if it has any real significance. IMHO, we'll need to watch it for many more days to determine that. Let me know if the following explanation is any better (I apologize that I tend to be obtuse in my wording)... For the below output, the "Q weighting" is the closing price of each Top 10 NDX stocks multiplied by its respective NDX weighting for that day. The "MP weighting" is my MP calc for each Top 10 NDX stocks multiplied by its weighting (same weights used to calc Q above). I take the Q weight and correlate it to the closing NDX index price. Then take that ratio and apply it to the MP weighting to get a relative value for the MP. I have no idea if this has any real significance/relevance. I did it just because I could ;-) The only takeaway at this point, as Matt suggests, is that the top 10 MP weighted value is less than the closing Quotes, so it might seem to suggest NDX is going lower into expiration. Lots of mights and ifs. [BTW, I don't always post the changes, but I always keep the following up-to-date on a DAILY basis: SPX components, NDX components, NDX top ten, NDX top ten weightings. So when I post a number, unless I (or one of my programs :-) have made a mistake, they will always reflect the latest. This means one day's MP weighting may noticeably "jump" relative to the previous day's if one or more of the top ten changes. altho practically speaking, the relative nature of any "jump" should be minimal.] there... that probably confused things enough. Message 11657759 ----- Q weighting 4103.76 (10) MP weighting 3872.60 (10) which correlates to 2344 (for NDX @ 2484)