Thursday, August 20, 2009

Living Large is a Mirage, and Max Pain

Check out this video on how Us living large was a mirage.


Much of what we are facing is a mortgage problem, which is a banking problem, which is a credit problem. 13% of all mortgages are being foreclosed or late on payments. That is huge. And it will get worse.

Check out these max pain (min pain) charts. They have a premium service too, never tried it. SPY at 100 take about $60M out of the market makers hands in option payoffs they have to make, compared to SPY at 98. This implies SPY moves to 98. But I think some index ETF's actually expire on Thursday, not 100% sure, not playing any. Its a cool concept, but I never paid it enough mind to come to a conclusion on whether it works well. It is a well known effect that stocks "pin" to an option strike at expiry.

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Insightful and Useful Comment!