+1
Precisely, hence this is a sporadic, statistically insignificant effect. Having watched god knows how many expiries, I have observed it maybe once or twice (if memory serves) .
Max pain
- Thread starter droid17
- Start date
Precisely, hence this is a sporadic, statistically insignificant effect. Having watched god knows how many expiries, I have observed it maybe once or twice (if memory serves) .
Max pain are the folks who went long SPY 129 calls yesterday only to see a 78% loss with only 2 days left to make it back or lose 100% of the investment.
@dhpar
sorry for my late reply and thanks for your input!
I will definitely incorporate some of you suggestions into the service. Currently it's a project to get me deeper into option trading - I want to keep the site free as long as possible (I myself hate registering etc.) and try to currently "finance" it with the iPhone and Android App and then build on that to extend the service as a whole (I'll probably add a top page with a little bit advertisement).
Reading the thread here and following also other discussions and controversy surrounding max pain I want to start analyzing it over the next couple of months with the aggregated data to check the expiration days and see which stocks actually come close to the max pain strike etc.
There definitely seems to be some interest in the theory itself as the standard symbols in our database grew from initially ~520 to over 670 in only a week, which are now updated on a daily basis.
If somebody else is interested feel free to use it: www.option-calc.com
I am always open for suggestions and would love to incorporate new features!
cheers,
Alex
sorry for my late reply and thanks for your input!
I will definitely incorporate some of you suggestions into the service. Currently it's a project to get me deeper into option trading - I want to keep the site free as long as possible (I myself hate registering etc.) and try to currently "finance" it with the iPhone and Android App and then build on that to extend the service as a whole (I'll probably add a top page with a little bit advertisement).
Reading the thread here and following also other discussions and controversy surrounding max pain I want to start analyzing it over the next couple of months with the aggregated data to check the expiration days and see which stocks actually come close to the max pain strike etc.
There definitely seems to be some interest in the theory itself as the standard symbols in our database grew from initially ~520 to over 670 in only a week, which are now updated on a daily basis.
If somebody else is interested feel free to use it: www.option-calc.com
I am always open for suggestions and would love to incorporate new features!
cheers,
Alex
good.
note that some of the criticism from skeptics in this thread is warranted and needs to be taken into consideration when the max pain concept is used.
max pain is useless without other information - but very helpful when you have all in place.
last month i posted 25 stocks from (sort of) random list. it is instructive to look at the first in the list (HNR) and how it performed since then. it performed exactly as max pain suggested (I made quite a bit of money there). wait for the next week after the major Jan11 expiration....
in this case all is in place, i.e. low liquidity of underlying, options concentrated in one fund which did a large bet in autumn on the drilling in Indonesia by the end of the 2010, heightened uncertainty due to Venezuela situation, not very transparent stock, etc.
cheers
p.s. you could also think about a relatively new concept - Current Pain. I never used it yet though - but it could add some additional insight. for example see here:
http://www.optionpain.com/CurrentPain/Current-Pain-demo.php
p.p.s. i see you are new on ET. don't spend too much time here. it is a site for amateurs - probably 99% of all posters. and it is getting worse.
note that some of the criticism from skeptics in this thread is warranted and needs to be taken into consideration when the max pain concept is used.
max pain is useless without other information - but very helpful when you have all in place.
last month i posted 25 stocks from (sort of) random list. it is instructive to look at the first in the list (HNR) and how it performed since then. it performed exactly as max pain suggested (I made quite a bit of money there). wait for the next week after the major Jan11 expiration....
in this case all is in place, i.e. low liquidity of underlying, options concentrated in one fund which did a large bet in autumn on the drilling in Indonesia by the end of the 2010, heightened uncertainty due to Venezuela situation, not very transparent stock, etc.
cheers
p.s. you could also think about a relatively new concept - Current Pain. I never used it yet though - but it could add some additional insight. for example see here:
http://www.optionpain.com/CurrentPain/Current-Pain-demo.php
p.p.s. i see you are new on ET. don't spend too much time here. it is a site for amateurs - probably 99% of all posters. and it is getting worse.
Very Good and thanks
It is interesting to find out the Max Pain for IWM from your calculations is 78, which is exactly what I predict as well for RUT. See my other post on"Stock" section in ET(post title-"rut").
Based on my other calculation (sorry can't reveal here the method on how I get it).. I am almost certain the settlement price for Jan11 RUT(or iwm) will be very close to 780(or 78 in IWM)
Alex, this site came up as "suspicious" from Zone Alarm. But it looks like they automatically do that if the site is less than 3 months old. Didn't want to unfairly paint it as a "bad" site.
Good trading to all.
Quote from Wayne Gibbous:
Alex, this site came up as "suspicious" from Zone Alarm. But it looks like they automatically do that if the site is less than 3 months old. Didn't want to unfairly paint it as a "bad" site.
Good trading to all.
It is a good site..
RUT Jan11 is trending 780 -- MAX PAIN !
@dhpar
Yes I figured as much. I also think its a good indication if you have all the other information in place as well. I actually looked into current pain and just did some calculations and I could definitely add that to the current site as well as to the iPhone and Android apps (as far as I saw the site you posted is for registered members only).
I will start some tests with tomorrows expiration date and then try to implement it as fast as possible so you can try it out too
!
Do you have other recommendations for options sites/forums where to look around?
@galvinlee888
No problem you are welcome! Yeah IWM looks good. I will actually add some additional statistics to the site which show which symbols closed close to the max pain on expiration day and then track that over the coming months to see if we can pinpoint a trend perhaps? Will be interesting!
@Wayne
yes, I only opened the site about a week ago after using it mainly for myself. So the warning should subside in about 3 months time, but thanks for the heads up.
Again if any of you have requests feel free to let me get to work!
cheers,
Alex
Yes I figured as much. I also think its a good indication if you have all the other information in place as well. I actually looked into current pain and just did some calculations and I could definitely add that to the current site as well as to the iPhone and Android apps (as far as I saw the site you posted is for registered members only).
I will start some tests with tomorrows expiration date and then try to implement it as fast as possible so you can try it out too
!Do you have other recommendations for options sites/forums where to look around?
@galvinlee888
No problem you are welcome! Yeah IWM looks good. I will actually add some additional statistics to the site which show which symbols closed close to the max pain on expiration day and then track that over the coming months to see if we can pinpoint a trend perhaps? Will be interesting!
@Wayne
yes, I only opened the site about a week ago after using it mainly for myself. So the warning should subside in about 3 months time, but thanks for the heads up.
Again if any of you have requests feel free to let me get to work
!cheers,
Alex
50% of the time it works all the time. People often look a week or a day or two before expiration and see the near-strike has 4x the dollar-volume than otm strikes and it becomes self-fulfilling. There is no *evidence* that max-pain is anything but BS. It's often that the "current" atm strike will have the greatest OI; it's the natural market for institutions and retail as well. Index demand is often in the skew, but that's another matter entirely. Run the max-pain on Feb SPX and I'll bet the down and out strikes will dominate.
I will agree that it may have some impact on low volume shares where it can easily be manipped via derivatives. I've yet to see any evidence, but can make the logical assumption that it can occur. Just as someone can (and has) spent a few million jamming the VIX settlement by buying thousands of garbage SPX puts as the VIX is being settled.
dhpar's ticker went from 12.8x to 10.9x from 12/9 to date; and the highest dollar value in OI was in the 12.5 and higher strike prices. I don't see any way to correlate max-pain and a drop in the shares towards the low dollar value strikes (in terms of OI).
I will agree that it may have some impact on low volume shares where it can easily be manipped via derivatives. I've yet to see any evidence, but can make the logical assumption that it can occur. Just as someone can (and has) spent a few million jamming the VIX settlement by buying thousands of garbage SPX puts as the VIX is being settled.
dhpar's ticker went from 12.8x to 10.9x from 12/9 to date; and the highest dollar value in OI was in the 12.5 and higher strike prices. I don't see any way to correlate max-pain and a drop in the shares towards the low dollar value strikes (in terms of OI).