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Feb Max Pain Expirations

 
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arthur
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PostPosted: Fri Feb 04, 2005 6:47 pm    Post subject: Feb Max Pain Expirations Reply with quote

Max Pain expirations work roughly over half the time when options expire, and work well over half the time two weeks before expiration. Recently, put/calls on individual stocks fell, while index put/calls rose, while the market rallied. So, there was a great deal of hedging or bearish bets with index options.

Currently, SPX Feb Max Pain is 1,185 with far more calls than puts (which is bearish, since the put-call ratio is a contrarian indicator). SPX closed at just over 1,203 Fri. OEX Feb Max Pain is 565 with far more puts than calls (which is bullish). OEX closed at just over 575. QQQQ Feb Max Pain is 38 with the value of puts far more than calls, which is bullish. QQQQ closed at 37 3/4. However, semiconductor stocks still have very low put/calls, which is bearish.

Therefore, I tend to believe, QQQQ will close the gap at 38, then fall towards 37, and then finish around 38 two weeks from now when options expire. Also, SPX and OEX may finish above current Max Pains, e.g. 1,195 and 570. With the volatility indices so low, the market may fall sharply sometime next week and then rally. There may be more intraday volatility the following week.
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