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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: lh56 who wrote (4507)	11/9/2001 1:30:33 PM
From: ajtj99	Read Replies (1) \| Respond to of 99280

Max Pain is a theory where the MM's will drive the prices of individual equities and Index equities so the maximum number of call and put holders get screwed. My experience is that it works out about 80% of the time, but as Mish has mentioned MSFT is not real good about cooperating in Max Pain.

To: lh56 who wrote (4507)	11/9/2001 1:57:31 PM
From: Kayaker	Read Replies (1) \| Respond to of 99280

Maxpain is from Ben Antanaitis. He used to post here on SI. Dunno if he still does. ez-pnf.com

To: lh56 who wrote (4507)	11/9/2001 11:45:05 PM
From: mishedlo	Read Replies (3) \| Respond to of 99280

Max pain is the point at which the most options expire worthless. Several months in a row INTC closed within pennies of it. In general the more options the more reliable it is. For whatever reason MSFT usually closes above pain. I do not know why. Some sort of QQQ balancing - perhaps? In the middle of a bull run, or bear plunge pain is totally worthless. In a normal market or sideways market it is quite reliable. I look at CBOE on stocks I am interested in. If you see 10000 puts and 10000 calls on a stock at say 15, and ther are no other puts or calls, figure the damn stock will close at precicely 15. You will notice that this does not always work. What if there were 10,000 buys of calls at 15 and 10,000 sells of naked puts at 15. That stock could fall to 5 and it would look like pain was way way off, when in fact any close below 15 would suffice for pain purposes (but in this case the lower the better for the option sellers). That is just one of the problems with pain. Who owns the puts and calls? It USUALLY balances out but not always. M