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Technology Stocks : Novell (NOVL) dirt cheap, good buy? -- Ignore unavailable to you. Want to Upgrade?

To: EPS who wrote (21717)	4/17/1998 3:58:00 PM
From: Ben Antanaitis	Read Replies (1) \| Respond to of 42771

Victor, First, the Max-Pain theory is geared toward determining the closing stock price on expiry day based on the options mix. Not the other way around. I am looking to determine at what stock price, if the stock price could be manipulated, the maximum number of options expire worthless. And finding that point, one could have a high probability of knowing which way the price of the stock may go to end up at that point on expiry day. The entire analysis methodology is explained in a worked out example that you reach by clicking on the link at the base of the Options Analysis link table on my web site: pipeline.com I will be posting the April wrap-up, placing a 'closing price' line on the Max-Pain charts generated last week, over the weekend. I will post a notice when the update is completed. BCA Software only produces EZ-PnF, a point and figure stock charting program, available at the web site above. The Max-Pain exercise is just that, an interesting theory I heard of and chose to track for several high-tech stocks. I use a spreadsheet to do the tabulations and graph generation... no non-linear math or exponentials required because everything is evaluated based on expiry day. So an Call option has a straight forward value: 0 if closing price is at or below the strike price OR closing price - strike price if closing price is above strike price. A similar but converse relationship holds for Puts. The rest is just tabulating all the Puts and Calls from the CBOE data versus the range of possible closing prices on expiry day. I did 'make the leap' of plotting the sum of the value of all the calls and all the puts to get the Max-Pain point. Well, reading the example will just dot the i's and cross the t's now. That was the reference on Max-Pain as I present it. But there have been several/many write ups on the phenomenon in theStreet.com over the past months. They give you a free 2 week trial, if you want to search the archives.. Cramer has written about it in his Wrong! columns and the 'technical analysis school' column wrote about aspects of it just last weekend. Ben A.