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To: KeepItSimple who wrote (179569)	7/13/2002 12:37:22 AM
From: mishedlo	Respond to of 436258

KISS in theory they can hedge any time (some people insist "the powers that be" are always delta neutral). Personally I doubt they are neutral. If they were we would not see these sudeden explosive rallies out of nowhere typically within 7-10 days of expiry. If they are not properly hedged we see the mysterious upgrade or downdrade or just plain out of the blue rally. The reason why it is important to WAIT is that max pain can and does change during the month. Sometimes quite dramatically. Last month Max pain (one month out was 37! but dropped like a rock as bears learning their lessons cashed out puts and bulls kept piling on with calls). The way to play it is, 7-10 days out, the further the the distance from pain the earlier the rally will likely start (March bein the perfect example - look at that rally please). But, wait for the confirmation. Once the explosion starts, pile on and assume max pain is gonna hit. Bail if it looks like you are wrong. Note: all this is in hindsight (and most of these I played small cause I am an idiot), but loading up when extremely undersold, 7-10 days in front of expiry at the first real sign of a rally has been a huge winner all year. If the damn thing overshoots, buy puts and assume a pullback (March overshot by a full 2 QQQ points, whereupon we declined without ever looking back). Max Pain provided no signifiucant rallies the past 2 months (I am counting this one but I could in theory be wrong) cause clowns kept loading up on calls in anticipation. I did a post on the Turnip board on this and suggested this rally was DOA cause of all the call buying. Huge call buying into a decline causes max pain to drop. That is why you wait. The further from pain we are, the deeper in puts the option chain looks, the further away (but no sooner than about 10 days) the rally is likley to start. Look for a BS catalyst such as CSCO reporting, AMAT reporting etc and judge how overbought or oversold we are at the time and act accordingly. It has taken me a long long time to figure this shit out. The Key is a "Max Pain Hit" during the week, take the damn profit and run. This month we had a nice 4th of july rally but people kept piling on with calls on the fisrt pullback, lowering max pain from 27 to 25 and killing the rally. Watch CBOE for buildup of puts and calls at nearby strikes for a clue as to whether it contines or stalls. Does this make any sense? M