Option effect

Discussion in 'Trading' started by duard, Mar 17, 2006.

  1. duard


    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.

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

  3. TheDr.


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



    What data are you using OEX, SPX, NDX?

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



    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
  6. 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.
  7. 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.

  8. 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.
    #10     Mar 20, 2006