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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John who wrote (66956)	1/16/2001 2:49:46 PM
From: HairBall	Read Replies (3) \| Respond to of 99985

John: It would be great if you would provide an option expiry target number for the QQQ based on your theory to see how they compare for a few months. The very concept of "Max Pain" for option expiry brings to mind my motto: "Think Like A Criminal". Think about it before you put out the effort...<g> Regards, LG

To: John who wrote (66956)	1/17/2001 4:44:12 AM
From: Moominoid	Respond to of 99985

Though they could diverge randomly I think there might be an equilibrium where on average your proposed method will equal the actual QQQ max-pain value. For example if I have QQQ call and I know max-pain using your method is below my strike then I will dump the call before it loses all its time value. The same if I have a put and the theoretical max-pain is above the strike then I'll dump the put. This should cause a convergence of the QQQ max-pain to the theoretical value. Also QQQ only tracks the index not because of a fixed rule like a mutual fund but because of arbitrage possibilities if it doesn't.