Option effect

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.
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I use the front month to get the current picture. I look further out for hints of what the future may bring.

Keep in mind when a put is sold naked at a certain strike it means the seller either thanks the stock/index is going to move higher and the put will become worhless or the seller wants the underlying to be put to him at that price - the premium he received for the option. Both are bullish.
The exact opposite holds true for those selling calls naked.
 
Quote from cnms2:

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.
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Max pain will move, that is why I watch open interest every day and look for significant changes at strike levels. Max pain is not foolproof, it can get skewed by news, earnings etc. But in my years of studying it, I will not bet against the story that option interest shows. Option sellers sell hope. And 90% of the time that hope ends up worthless. Who's side do you want to be on ?
 
Quote from volente_00:

keep your open on SPY put interest for April.



:)
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Are you looking at open interest totals for puts, or specfically 130.00 puts on SPY?

If so, I see what you mean
 
Quote from volente_00:

keep your open on SPY put interest for April.



:)
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06 Apr 1175. (SPT PO-E) Put Vol 209079

06 Apr 1375. (SXY DO-E) Call Vol 160228

06 Apr 1400. (SXZ DT-E) Call Vol 143707



Volente,

You must be watching this!!!!

What do you think?


Duard
 
Well, what's glaringly obvious is the 100 pt spread with 1275 in the middle where alot of options sit as well. If the median is 1275 we have a skewed distribution to the downside. BIG MONEY IS SHORT!!!
 
Right I see what you mean....I tried to follow this in the past without much success..But, will look more closely in the future. It makes sense..

Thanks for the info.:cool:
 
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