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Strategies & Market Trends : Playing the QQQQ with Terry and friends. -- Ignore unavailable to you. Want to Upgrade?

To: rab120 who wrote (1692)	8/3/2005 10:37:40 PM
From: Walkingshadow	Read Replies (1) \| Respond to of 4814

Very definitely it means something... that's a good observation. If you just eyeball the open interest in QQQQ for the front month contracts, you can see there is a lot more put interest than call interest. Conventional wisdom states that, in general, the options pits will pressure an issue in a manner that will cause the maximum amounts of contracts to expire worthless. They can do this in a number of ways. A ballpark figure that will tell you the price of QQQQ at which the maximum number of contracts will expire worthless is called the Max Pain Point. There are sites that calculate this figure, which is based not just on the number of contracts at specific strikes (calls vs. puts), but also on the value of the underlying stock that these contracts control (since they are leveraged 100:1). Here's some pretty good descriptions: daytradeteam.com 65.108.12.28 The upshot is that right now, the Max Pain Point for QQQQ stands at $39.00. ez-pnf.com So in general, the options pits will do whatever they can to get QQQQ to close as close as possible to $39.00 on the 3rd Friday of the month (which is options expiry). In practice, it is not as simple as this because the market is dynamic, and because you have to take into consideration who is selling contracts and who is buying contracts. Are professionals selling lots of small lots to retailers? Or are professionals buying relatively small amounts of big lots? These are two very different situations. But considering QQQQ is an index, in general, I'd say the options markets will be motivated to get QQQQ to $39 in the next few weeks. Keep in mind that the Max Pain calculation can change between now and then, however. T