Option effect

duard · Mar 17, 2006

How much do you think the expiring option profile had to do with this week's rally?

Looking at the options in spx it sure seems as though all the puts in the SPX were heavily weighted below 1300.

Thoughts?

volente_00 · Mar 17, 2006

How do you think I knew we would go to 1300 back when it was 1260 ?

TheDr. · Mar 17, 2006

Quote from volente_00:

How do you think I knew we would go to 1300 back when it was 1260 ?

Could you explain how this works...would appreciate it thanxs

duard · Mar 17, 2006

Quote from volente_00:

How do you think I knew we would go to 1300 back when it was 1260 ?

Word.

What data are you using OEX, SPX, NDX?

Front month. Differential between months. Change in contracts, etc?

volente_00 · Mar 19, 2006

I watch open interest on puts and calls on SPX.

http://65.108.12.28/cgi-bin/maxpain.cgi

http://www.thestreet.com/comment/wrongtactics/10399.html

http://www.thestreet.com/comment/rewrite/703618.html

Paccc · Mar 19, 2006

Quote from volente_00:

How do you think I knew we would go to 1300 back when it was 1260 ?

volente_00,

According to your first link, the SPX Mar '06 Max-Pain Point was 1275. Doesn't your method dictate that SPX would close nearer 1275 than 1300?

-- Paccc

volente_00 · Mar 20, 2006

If you are bullish and the stock is below max pain then it becomes less risky to take long positions under max pain. Max pain actually works better for individual stocks because they are esaier to manipulate than an index.

volente_00 · Mar 20, 2006

Quote from volente_00:

I watch open interest on puts and calls on SPX.

http://65.108.12.28/cgi-bin/maxpain.cgi

http://www.thestreet.com/comment/wrongtactics/10399.html

http://www.thestreet.com/comment/rewrite/703618.html

Correction, I watch put and call open interest on SPY.

duard · Mar 20, 2006

Quote from volente_00:

If you are bullish and the stock is below max pain then it becomes less risky to take long positions under max pain. Max pain actually works better for individual stocks because they are esaier to manipulate than an index.

Interestingly, there was a bimodal distribution in the SPX March 06 options @ 1275 and 1300. April 06 SPX Options were/are more heavily weighted at 1300. That was the source of my question--- Are you using a blended formula with the front month weighted more heavily?

Max pain has been around for awhile and to some degree I think there is some validity.

Thanks.

cnms2 · Mar 20, 2006

I wonder: on a trendy stock (GOOG, AAPL, SNDK, ...) doesn't this max-pain point move with the underlying's price? The most activity always happens at the money.

Quote from duard:

Interestingly, there was a bimodal distribution in the SPX March 06 options @ 1275 and 1300. April 06 SPX Options were/are more heavily weighted at 1300. That was the source of my question--- Are you using a blended formula with the front month weighted more heavily?

Max pain has been around for awhile and to some degree I think there is some validity.

Thanks.