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

To: Dan Duchardt who wrote (32994)	10/15/2000 5:14:58 PM
From: UnBelievable	Respond to of 42787

The $NDX Members With The Largest Market Capital May Not Be The Ones Used To Move The Index While $NDX is generally a market capital weighted index NASDAQ clearly states that they make adjustments to the weighting to ensure that the index is appropriately representative. A while back I created a spreadsheet which calculated the true market cap weighting and the assigned Nasdaq weighting. In addition the Nasdaq weighting is assigned quarterly while the real weighting obviously varies daily. In general what I saw was that the very large market cap stocks tended to be underweighted and the smaller cap stocks tended to be overweighted. The implication of this for me was that if someone had an interest in affecting $NDX or QQQ there would be certain stocks which would be particulary efficient for this purpose (Those whose Nasdaq weighting was the most disproportionate with the actual market cap weighting- based on the oversimplification that the cost of moving a stock $1 was a consistent function of the market capital of the stock.) I'm sure that you could develop an even more cost effective way in which to influence $NDX if you further refined the analysis based on average trading volume and the cost of creating a $1 delta in each of the more overweighted component stocks. Assuming that the party interested in moving the $NDX or QQQ to minimize option value at expiration also had a similar interest with regards to the value of the options of the underlying issues the analysis would also be expected to take into account the impact on the option values of the individual issues. None of these are particularly difficult calculations nor is developing the optimum solution. I'd be quite surprised if investment firms with significant derivative liability don't have, and use such a program. If I get time maybe I'll try to put something together. While such a program would develop a different solution for each major player based on their own exposure to particular options, based on the same aggregate market forces concept that Max pain itself is based on I would expect you could identify a reasonable list of stocks and the direction of their moves as option expiration approaches.

To: Dan Duchardt who wrote (32994)	10/15/2000 5:40:41 PM
From: OX	Read Replies (1) \| Respond to of 42787

>>>It might be interesting to get MaxPain on all the NDX components and use that to predict closing price on QQQ. hi Dan, I've done that before, but now only track the top 10 components (both weighted and unweighted). some of the smaller NDX components don't have meaningful MP values however. Message 14582633

To: Dan Duchardt who wrote (32994)	10/15/2000 5:55:58 PM
From: donald sew	Read Replies (1) \| Respond to of 42787

Dan, Thats really good info, thanks. Frankly I never really watched the MAX-PAIN on the QQQ's until I was asked the question on the NDX. >>>> My impression is there is a lot more money on the line for those than for the index. For example, CSCO all by itself has a $20M difference if it closes 5 points away from MaxPain, INTC about $15M. The big stocks in the NDX will most likely push the index to wherever it may settle. <<<< Using the same principle you mention - here are the divergences of various stocks from their MAX-PAIN: AAPL - negative 42 cents AMAT - negative 6.50 AMD - negative 5.62 AMZN - negative 6.50 CPQ - negative 4.80 CSCO - negative 1.42 DELL - negative 17 cents IBM - negative 10.87 INTC - negatie 4.62 MSFT - negative 11.60 MU - negative 13.50 TLAB - negative 3.75 So for the individual stocks there still appears to be upside pressure, but not by an extreme amount Interesting to note that CSCO is close to its MAX-PAIN already. AOL - negative 2.00