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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: M. C. Orme who wrote (49)	4/19/2001 2:10:47 PM
From: Uncle Frank	Respond to of 5205

>> I would appreciate someone explaining to me or directing me somehwhere that I may find an explanation of Maximum Pain that is easily understandable. I can't seem to grasp the concept and how it relates to expiration and price movement. MaxPain is based on the old saw that most options expire worthless. They analyze the open contract positions on the entire range of options for a security, both puts and calls, and then compute the price of the underlying stock at expiry which would result in the greatest cumulative loss for all derivative holders. That becomes the max pain point. Since it ignores news, earnings releases, fed rate decreases, etc., it isn't very reliable, but it's fun to look at. This link takes you to a more complete description: ez-pnf.com and this one computes them for you: iqauto.com Note that for sebl, April's Maximum-Pain Theory Value is 35, and qcom's is 55. uf

To: M. C. Orme who wrote (49)	4/19/2001 2:52:35 PM
From: FaultLine	Read Replies (1) \| Respond to of 5205

dmco, Here are a few more Max-Pain refs from A Friend: --dfl ======= Max-Pain Point™ Author: Member 3307095 "The "Max-Pain Point™" Options Analysis Technique": ez-pnf.com >>>There is a Wall Street axiom that says "90% of all the options that are bought and held to expiration will expire worthless". This means that 90% of the time the people who 'write' the option and collect the premium, never get their stock 'called' from them or get stock 'put' to them. Whether the actual percentage is 90% or something lower is irrelevant to the evaluation of the Max-Pain™ effect. The perception that most traders, who buy and hold options until expiration, will lose has also been called the theory of maximum pain or Max-Pain Point™ or just Max-Pain™, for short. <<< Analyses: ez-pnf.com iqauto.com ========================================== "Generally Established Rules" by an ex-MM, Mark Peterson CPA: Message 12652116