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

To: bajasurf who wrote (44443)	3/27/2002 11:37:03 AM
From: Ted Downs	Respond to of 99280

Max Pain iqauto.com

To: bajasurf who wrote (44443)	3/27/2002 6:08:18 PM
From: mishedlo	Read Replies (1) \| Respond to of 99280

I wish I had all my collections of Max pain in a single place. Max pain is simply the point where most options expire worthless. It has been a big winner 4 months going. It does not always work. The stocks to watch are QQQ INTC MSFT CSCO If you can figure out the direction of those then you are a winner. Max Pain starts working somewhere between 2 weeks to 3 days in front of expiry. The farther away from max pain we are the sooner the turn. Delta hedging will kick in either way if Max pain does not work. What that means is that any failure is likely to be huge. Finally, I call max pain a success if it hits anytime during expiry week. Wed is typical in fact. At that point all the time value has been totally sucked out of options and the trend can change on a dime, and close in a different direction and not right on pain. Hedging and the turn on WED have been common these past few expirys. I will note that on WED (by recollection) we were sitting right on pain 4 months going. This past month, QQQ overshot and sunk back into pain (and kept sinking after) expiry week. That is it in a nutshell, but I am sure there have been more details elsewhere, but all in piecies I am afraid. WWW.IQUATO.COM has a max pain calculator. Please do not try and use this on thinly optioned issues. Go to www.cboe.com and look at open interest on CSCO, QQQ etc and compare to CIEN or EMLX and you will see the latter is totally meaningless. M