Option Expiration - Max Pain Theory

[JJ2000426]

TL Trader:

If you do statistics on QQQ, maximum pain theory may not show its effect if daily trade volume is way much higher than the equivalent amount of call/put disparity. But I guess when the option disparity is very significant in comparision with the daily trade volume, then there may be an effect.

We will see in 2 days.

Plugger, regarding cold fusion, American Physical Society endorsed cold fusion by sponsoring two cold fusion talks during 2007's official March Meetings. APS is serious science organization, not a pumper. If APS endorses cold fusion, 18 years AFTER they ridiculed it, you've got to pay attention. They will have another cold fusion talks in 2008's march meetings.

See the APS links. So it's not rumor:
http://meetings.aps.org/Meeting/MAR07/SessionIndex2/?SessionEventID=64258
http://meetings.aps.org/Meeting/MAR07/sessionindex2/?SessionEventID=57225

More on LENR web site:
http://www.lenr-canr.org/News.htm

But the immediate PGM metals bullish factor is the coming mass application of fuel cell, in mobile electronics, and in vehicles. Google DMFC. Also see it on FuelCellToday:
http://www.fuelcelltoday.com/

 

[Equalizer]

Quote from JJ2000426:

...http://seekingalpha.com/article/57172-calling-a-north-american-palladium-bottom

The Bozo who wrote the above piece in the given link is clearly clueless about:
1). Corporate Finance - someone give him a copy of an intro book like Brearley and Myers for Christmas.
2). Reading a chart that is "yelling" at him.

 

[JJ2000426]

The trading on PAL so far today is very slow and very boring.

I really don't understand, those put options to be expired tomorrow has got to be disposed off either today or tomorrow. How come it's not causing stock price move? It's a fairly large amount, more than a day's worth of trade volume.

Maybe tomorrow is the day?

 

[JJ2000426]

The maximum pain of option expiration effect does not materialize on PAL so far.

I really don't understand it. Can any of you guys knowledgeable explain why it does not work?

5365 contracts of in the money puts, virtually nothing of in the money calls. Daily trade volume is less than half a million. Why no one is exercising those puts so far?

 

[forex-forex]

Quote from JJ2000426:

The maximum pain of option expiration effect does not materialize on PAL so far.

I really don't understand it. Can any of you guys knowledgeable explain why it does not work?

You are a Maximum Pain.

 

[JJ2000426]

The outstanding short interest is about one day's trade volume. But there is only 40 minutes left for them to be exercised.
There is no trade of those puts so they must be exercised.

My guess is it's probably going to be in the last 20 minutes or so. Just watch PAL closely. It is making a move right now.

 

[JJ2000426]

So the option expiration effect does not materialize. The trade volume of PAL is nothing unusual. 5365 contracts of in the money puts just get silently exercised without as much as a splash of water. Just incredible.

Can some one explain to me why exercise of half a million shares worth of put options in one day has no effect on the stock price. The sister stock SWC does rally hugely today, why there is no move in PAL?

 

[timbo]

Options are contractual -- hence, the max pain myth.

 

[razor99]

wht do traders bother with stocks under 10 bucks? makes no sense to me.

 

[syswizard]

Talk about "PAIN"....except for 1 or 2 expirations over the past year, anybody selling credit spreads with calls has got to be hurting right now. If you were doing far OTM spreads, then fine, but if you did NTM spreads within 30 days of expiration, which is usually the "sweet spot" for max profits, you got hammered as the indices almost always roared in the final 2 weeks.