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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: niceguy767 who wrote (100822)	3/29/2000 7:06:00 PM
From: Gopher Broke	Read Replies (1) \| Respond to of 1574071

Niceguy, Re: Max pain being more relevant for equities trading sideways. Thinking about it some more, I am not convinced of this. I would guess that the price movement is triggered by the sale of the underlying equities as each options position is closed. If there are a lot of call options outstanding, as with AMD right now, the market-neutral option writers are presumably holding a reservoir of shares to cover those options. When any option position is closed they will sell the underlying equity because they are not interested in holding a long position in the stock. This naturally depresses the price to the point where options are left to expire rather then being closed out, ie the strike price. This effect will be particularly exaggerated when there are a lot of options to be sold in a short period, ie between AMD earnings and expiration.