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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Robert O who wrote (21760)	7/14/1998 10:40:00 AM
From: Ben Antanaitis	Respond to of 70976

Robert O, The Max-Pain effect is a well known effect and has been written about in numerous places. Most recently it has been discussed as 'strike price pegging' and 'option's expiration driven stock price moves' in several columns at theStreet.com. The articles are in the archives of the WRONG! and The Saturday Options School columns. But, more to the crux of your question, currently I am only studying the correlation of the effect. I am following a spectrum of tech stocks and an index to see how this effect does or does not come into play during the third week of each month. You can go to the web site and select the 'options analysis' page and view the on-going results of the study. Historical charts are available. Note that the 'final' chart shown for each stock is created at the end of the 2nd week of the month (5 days before expiry) and the stock closing price at expiry is overlayed on it. RE: Dell. This is not much different than the graphs of LU over the past couple of months. Max-Pain is a second order effect ie events that can cause price momentum eg breaking news, earnings run-up/surprises, upgrades/downgrades, Greenspan, etc. can and do 'swamp-out' the 'natural gravity well' that the Max-Pain point forms. Further, the current DELL action is a result of the almost hysterical buying frenzy in the anticipation of blow-away earning and a rumored stock-split thrown in with a charismatic CEO. Max-Pain doesn't stand a chance in this case. In fact, during earnings reporting months it may turn out that Max-Pain is not the indicator of choice on those months. But indicator it is. Look at the results in months when momentum was out of the picture. There is no random effect here. And if a stock holder can get an additional indicator that can help him make a reasoned discussion... then I think the work is worth it. Ben A. ez-pnf.com