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Strategies & Market Trends : Harmonic Trading with The Phoenix -- Ignore unavailable to you. Want to Upgrade?

To: Glory who wrote (654)	5/15/2003 12:04:14 PM
From: the-phoenix	Respond to of 941

I think it works better on index options and large cap stocks like MSFT, GE, etc. That is where the options volume is at. I would personally never trade based on Max Pain, but I like to see if it favors a trade I am contemplating.

To: Glory who wrote (654)	5/15/2003 9:21:11 PM
From: bcrafty	Respond to of 941

Glory, I believe phoenix is correct It works best on the large-caps, and particularly those with large OI, but even then it's not a trading guide I personally would trade by; for instance its been "wrong" the last three straight months, and looks to likely miss this month. A major assumption behind max-pain is that the bulk of the option writers are presumably the large houses who have enough money to temporarily move the individual issues to certain levels at certain times thus causing many options to be OTM by expiration. If that assumption is so, then I'm somewhat puzzled by their recent consecutive misses. The person I know who follows it most closely as a phenomenon and who has studied it the most is mishedlo who you'll find on several SI threads. He likes to concentrate mostly on QQQ, MSFT, INTC, CSCO, IBM and a couple other biggies. He felt it was pretty reliable last year, only missing during the months where we coincidentally had rallies (of whatever degree). That fact might tell us something in general: perhaps it works best when we are strictly following the major trend i.e. a downtrend within a downtrend rather than an uptrend within a downtrend. But that observation is just my informal guess, so you might run your max-pain questions by him. Another person that follows max-pain closely is ajtj99 so you might ask his thoughts.