Excellent explanation on the mechanics of delta neutral trading. But I have a problem with any kind of Max Pain Theory. If you look each month at the distribution of expiration prices of nearly 3,000 optionable stocks, they lie across the spectrum of price. They don't cluster near strikes. Many have passed thru these and other boards claiming its feasiblility and existence. Lotta talk but nary a one who has dared to predict the closing price has been able to do it.
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max pain LOL screaming and crying of PIN or whines of manipulation LOL This forum is always good for a laugh when you need one.
You are paranoid. No one is pinning the stock to rob you. Don't believe what you read on Yahoo finance forum. It's a bunch of ill-informed people yakking. No one is pinning the stock. Period. Just because you expected the stock to drop by $2 doesn't mean it will do that. Stocks occasionally close at or near the strike price. That's the law of averages. In addition, when MMs are LONG the ATM options, they have lots of gamma when the stock approaches the strike. Thus, when the stock dips below, they get short and buy stock. When it rallies above strike, they get very long and sell stock. they do that to make money and offset the large theta of owning ATM options. They don't care about you and your options. This is a natural phenomenon and only those who do not understand how this works complain of planned pinning. Can you imagine how many shares someone would have to buy and sell just to pin the stock? Can you imagine anyone trying to do this in the real world? If you can, you have some imagination. Pinning, as you define it, is a myth. Statistical studies slow a small inclination for a stock to moves towards a strike. But it is VERY small. You bought the wrong put options and want to blame that on someone else. Mark
The problem with Max Pain is that it discussed among people who don't know much about options. Then the story gets spread, and more people believe it. Among those who know how options work, it's obvious that max pain is a myth. But there is no way to calm the masses. Mark
To better know what exactly happened can you post what strikes you bought, the date and time you bought, if you bought calls or puts and the amounts bought if it was a spread of some kind. GOOG does this kind of thing a lot too so it might be a good stock to look at.