Max pain

Discussion in 'Options' started by droid17, Dec 16, 2010.

  1. droid17


    Hi all :)

    So with opt exp coming 2mor I have been reading a lot of post on the boards about "max pain" I am aware of what it is, but I am confused as to how it is calculated. Also whats your guys opinion on it, is it a wife's tale bad investors use as an excuse as to why their position is worthless or is it the real deal?


  2. If you really did read the posts on ET about "max pain" you wouldn't be confused about how it is calculated. 99% of ET posters - including me - don't believe in "max pain".

    Could you post some links to ET threads that specify otherwise?
  3. droid17


    Hi ForexForex,

    Sry I should of been more clear. I didn't mean ET posts. I meant others, typically stock boards such as Yahoo. If you go to just about any ticker symbol someone is yapping about "max pain" and others throwing around numbers and how they figured it out. I thought by posting this question on an Options board I would be a more accurate answer.
  4. Perhaps you could post these "numbers" on ET and educate us about 'max pain".

    About 99% of ET members don't believe in "max pain", so I think my answer is fairly accurate.
  5. As an experienced options trader I can tell you the general idea behind "max pain" is important. Its not every stock but I can tell you there are many stocks that frequently regress to whole number areas on expiry day. If you hold until late in the day on a barely "in the money" position, more times then not you will be screwed out of most of your money, only to see the stock start to trade normally again on the following Monday.

    This is less of a "conspiracy theory" then an acknowledgement that any area where a lot of money is on the line will be traded by big players to their best advantage.
  6. In the past few years, how often are you holding options on expiry day ? How many people on here actually trade options on expiry day ?
  7. droid17


    So this is what someone posted on a DRYS board a few days ago. Talking about "max pain" I am still curious as to how it is calculated and how do you determine a number from below. Also I am not looking to "educate" anyone, I am looking to be educated on this topic.

    December 14, 2010 - 2-Day Option Open Interest Data:

    Max Call∆ 6
    Max Put∆ 5
    Max Pain∆ 5
    Max OI∆ 6
    Near-Strike∆ 6.3
    Max Pain Bias∆ _

    Max Call∆ 71,918
    Max Put∆ 22,538
    Max Pain∆ 55,118
    Max OI∆ 86,305
    Near-Strike∆ 86,305
    Max Pain Bias∆ _

    Total Call OI∆ 206,568
    Total Put OI∆ 85,465
    Total OI∆ 292,033

    Put/Call Ratio∆ 0.4137
  8. I do it... Why not? It can be fun, if you have time for it...
  9. JPope


    There are plenty of purposes for options with a few days left i think, maybe less for day of expiration. Alot funner than blackjack?
  10. This opx weekend is quad witching.... my whole it dept is going nuts.
    #10     Dec 16, 2010