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To: cfoe who wrote (67356)2/18/2000 6:38:00 AM
From: Wyätt Gwyön  Read Replies (1) | Respond to of 152472
 
I believe max pain is the point that creates the most misery and least happiness for shorts and longs combined. For longs alone, max pain is obviously zero, but a zero figure is not realized because their misery is offset by the happiness of the shorts as the price drops. Conversely, max pain for shorts is obviously infinite, but this is not realized due to the offsetting happiness of the longs at some price. That place in the "excluded middle" where the most people are the most unhappy before other people are really happy is supposed to be max pain. (I think :)



To: cfoe who wrote (67356)2/18/2000 9:34:00 AM
From: TigerPaw  Respond to of 152472
 
Max Pain Analysis.

From the horses mouth...

ez-pnf.com

(Look on sidebar on left of page for link to description & current analysis)



To: cfoe who wrote (67356)2/18/2000 9:55:00 AM
From: beagle57  Respond to of 152472
 
I believe the "Max Pain" Value is based on the minimum possible value of the sum of all outstanding options expiring at that time. As the price of the underlying stock increases, the call values increase. As the price of the underlying stock decreases, the sum of the puts increases. The max pain value creates the minimum total combined value for holders of options therefore creating the "Max Pain"..