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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (73582)	8/17/2006 10:23:14 PM
From: Real Man	Read Replies (2) \| Respond to of 94695

There is always buying or selling pressure driving prices to equillibrium on options expiration. The reason is vanishing premiums, speculators taking profits, etc., which drives price to equillibrium through delta hedging. iqauto.com This max pain site gives the equillibrium price of the cloud of expiring puts and calls. Normally, if, say, NDX is 100 points below its equillibrium price 1 week before expiration, one can make a quick 300% in profits buying calls. Did it a few times myself -g- Surprizingly, I found that max pain works extremely well during expiration week in extremely lopsided situations. Sometimes it does not work, but it does 80% of the time. I'd say it depends on the volativity. If volativity is large, there is a greater chance it won't work. So, perhaps, the distance is determined how far the equillibrium is in terms of standard deviations. I mentioned it as one sided because there were virtually no puts above qqqq=39