Max Pain - A look ahead Last month Max Pain "failed" in that across the board stocks did not "touch" max pain during expiry week (which is my definition of success or failure). We had a derrivative meltup last month.
I do not recall two max pain failures back to back in the same direction. Possibly around 911 but I do not think so.
The key stocks/indicies I always watch are: QQQ SPX DJX INTC MSFT CSCO
and I like to add in others as appropriate IBM C
OI is moderately heavy this month but not as heavy as last month. In general we have the steepest plunges when OI is light and PUTs even lighter but that is not always true.
Stocks sit above Max pain in general right now, but not ridiculously so.
SPX has more calls than puts (sometimes heavily) at 900 875 850 and more puts than calls at strikes below that. Max Pain is 850 and has been all month. Perhaps that accounts for some of the drop we have experienced after the derrivative meltup.
DJX max pain is 80. Again perhaps that accounts for some of the drop we have experienced after the derrivative meltup.
QQQ max pain is 25 but 26 is a moderately close second. It was a solid 25 earlier but has crept up to let's call it 25.5. OI on QQQ is considerably lighter than last month on second look. Heavy calls (relative to OI) at 25 26 27 and heavy puts at 26 25 24. Were it not for a huge block of puts at 25, I could see QQQ max pain falling to 24. Overall there are more calls than puts and I would call that slightly bearish.
INTC optimism is pretty rampant. Huge numbers of calls (close to or over 100K) at 17.5 and 20. Calls outnumber pust 3-1 and 10-1 at those strikes. Put side is relatively light by comparison (obviously) but it is not insignificant with 36K at 17.5 Max pain is 17.5 but due to the abundance of calls I would call that a "soft" 17.5, with heavy "options resistance" at 17.5
MSFT optimism is pretty rampant as well 100K average calls at 25 27.5 and 30 That said, put volume at 25 is heavy at 85K Max pain is 25, and 25 should have pretty heavy "options support"
CSCO optimism is pretty rampant as well. 155K calls at strike 15 vs 47K puts. 53K calls at 12.5 vs 48K puts. Max pain is 12.5 and CSCO really has been acting weak lately. It did not participate as much in last months ramp job. Is there bad news out there on CSCO or is it all pain related?
IBM max pain is 80 on sufficient but moderately light OI. In general more Puts than calls
C max pain is 32.5 and if we are headed down perhaps the financials lead. Is this the clue. Still OI is moderately light but puts even lighter. If they want to sink financials now is a good time.
JPM max pain is a solid 22.5 with no close seconds. Put OI on JPM is about as light as I have ever seen it. Has everyone given up shorting JPM? Is this another sign that financials will lead the next wave down? Call OI is modestly heavy (for JPM) with calls outnumbering puts at 6-1 at 25 and 2-1 at 22.5
GE max pain is 25. Heavy calls at 27.5 and 25. Almost no puts at 27.5. Does this explain the spike to 28 and the immediate selloff last week? I think so
Right at resistance. Is there another push up left, or is it time to lock and load shorts?
============================================================== Is there general interest in starting a new board related to max pain and options analysis or should I just keep posting here?
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