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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: jjs_ynot who wrote (32793)	10/13/2000 5:59:34 AM
From: Philipp	Respond to of 42787

Hi Dave and Don: In my statistical evaluation of the Max-Pain effect; once the difference between Max-Pain (option parity) and the current price gets more than about 4 strike prices no meaningful correlation was found. This may be due to hedging by MM's and hedge funds or the fact that market conditions overwhelm option price pressure. That is very much my experience as well and has in my mind a simple explanation. If there is a large discrepancy between present price and max pain, there will be lots of option holders with huge profits, and they will take those profits if the trend changes (I certainly will). After all with American options noone has to wait till expiration to see his/her profits welt away! The more important question in my mind is how forced margin liquidation will play out (remember 87) and what tricks Greenspan has up his sleeve to prevent/stop a melt-down (remember 98). After all the major indices broke important levels yesterday, just some psychological ones left, they will have to pull the market up today. I am sure they will try. Will they succeed? The ME situation is of course a wildcard, but in my mind has just been the trigger/excuse and not the cause of yesterday's fall, and a relaxation of that situation may well be used as an excuse for the turn-around. Good trading to all, Philipp