Cool Tool: Option Pain Calculator

Interesting webtool for visualization of option strike prices:


via Option Pain

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Discussions found on the web:
  1. techy commented on Jan 13

    does anyone know, why people maybe buying Jan 08, 120 puts for $6-8?

    is that speculation for end of world scenario?

    or is that part of some complex option play?

    if i wanted to speculate, i would buy FEB 08, PUTs for such low strike, because the probability is very high that apple may go down so low.

  2. BillD commented on Jan 13

    Can we change the option strike setting with this program? I am holding mostly in the money puts on financials, restaurants and other retail.

  3. 2and20 commented on Jan 13

    techy, i think you are looking at the wrong numbers somewhere, AAPL 120 puts look like they are ~ 5 cents?? and Feb ’08 puts are around 78 cents.

    BillD, you said, “Can we change the option strike setting with this program?”, the point of the program looks like it values ALL the outstanding options by open position size, and is finding the total value of those options at every price, so there are no adjustments to do.

    This looks very cool, I’m still thinking about whether it means options should tend towards the minimum in the graph. I guess delta hedgers could skew it a fair bit.

  4. Novice commented on Jan 13

    Would someone mind giving a fuller interpretation of this particular graph?


  5. Joe commented on Jan 13

    That’s pretty cool, but I need more of an explanation too. I hope that they can maybe allow you to select by expiration date too.

    I’m curious how they got their info. It says they use both the CBOE and information from yahoo (why should there be a difference?)

    With regards to the data from yahoo, do they just scrape the web pages or is there some other way to get the info from yahoo? (I assume the same question can be asked about the CBOE). So, if its based on just scraping data, is it legal to use the data? I assume it would be ridiculous for yahoo to go after most people for reusing their data. I ask, because I scrape yahoo data myself, and plan to eventually put up a web page based on the data I’m scraping.

  6. 2and20 commented on Jan 13

    agree with Joe, sorting by expiration date would be great.

    Novice, i think what it’s doing is getting the TOTAL VALUE OF ALL OUTSTANDING OPTIONS, if the stock was at each point on the graph. So in Barry’s picture, if Apple was trading at $185 just now, the TOTAL VALUE OF ALL OUTSTANDING CALL OPTIONS would be $3,305,776,000.

    The gist of this, that markets often seem to move in a way that causes the most pain to most participants. So if this is the case, I think it is being postulated that if Apple was to trade at $140 just now, that would cause the most pain, so is a potentially likely place for it to move to.

    However, for every option buyer there is a seller, so the sellers would gain from this move exactly what the buyers would lose. So not sure any of this matters.

    Would like to see it back-testes to see if it actually predicted or influenced stock moves.

  7. blue commented on Jan 13

    what’s the point? if you’re not an options trader then it seems like it should really be important, if you are then you know why it isn’t. where’s the market? first of all, why group all contract months into the individual strike? the ‘180s’ are represented by the jan 180s the feb 180s the april 180s the july 180s… but that data needs to be be split out and away. jan aint july and who cares about the aggregated numbers of the two? it’s almost a stock trading tool, as opposed to an options trading tool? not much value in short term stock trading tools that are graphical representations of information easily found elsewhere. now, an options trading tool with the the months individualized that could show you the discrepancies at a glance, that would be interesting…

  8. kurt commented on Jan 13

    so far, in the last couple of years, apple has closed around 50% above max pain for january (leaps)
    the call holders have been bled, and the put buyers from the recent days have done quite nicely, but I’d think they may be bled this week as well…

  9. Mike commented on Jan 13

    Interesting but it would be more valuable to see intrinsic value of the call and puts.

  10. Mike commented on Jan 13

    Interesting but it would be more valuable to see intrinsic value of the call and puts.

  11. Steve Barry commented on Jan 13

    Max pain for AAPL is down 18%…GOOG down 6%…yet QQQQ up 2%. I would say all 3 things happening are a metaphysical impossibility.

  12. Norman commented on Jan 13

    One of the rules of graphs is that all you need to know to interpret the graph is on the graph itself. Without values on the ordinates this graph doesn’t mean s— to me.

  13. techy commented on Jan 13

    my question still remains, i mean this option graph is for jan 08.

    someone is buying 120 put, what purpose?

    i know they are price like $4-8 each contract.

    its almost impossible that things can move so far, but if things do move, its like a lottery ticket. so who is buying these? is it for speculation?

  14. DavidB commented on Jan 13

    I’m surprised you guys haven’t heard of this. I’ll try to expand on it. First off the graph is only measuring front month options to get the most accurate data.

    Here is how one of the authors of
    one of the original calculators describes it:

    By looking at the price of the underlying issue, on the last trading day before option expiry, (Note: options officially expire the day after the third Friday of the month.) it has been seen, with statistical significance, that the closing stock price tends toward the option strike price that forces the greatest number of options to expire in a worthless condition.

    Whether this tendency is deliberately caused by some conscious effort at market manipulation or is just a result of some natural market law of supply and demand, has not been investigated nor hypothesized by this analyst. What is significant, however, is to be aware that this effect does seem to be a tendency that occurs during those times when there is not some major market upheaval, price momentum, or breaking news relative to the stock in question.

    I’ve noticed it with consistency in many stocks I’ve traded. You’ll know if the options sellers are gunning for the strike price if it closes within 25 cents which is within the mandatory exercise threshold

    Two examples I am following this week. AMX, their max pain is $60 and they have been hovering around that price point all week and probably will close near there next week. INTC, now this is a high volume stock but coincidentally it just happened to start gravitating towards $22.5 the last little while which just happens to be Max Pain for the stock

    I’ve traded it enough times to see profit from the theory but I wouldn’t trade on it by itself. You tend to get an outside event which can knock it way off sometimes but if you can incorporate it into a bigger trading strategy it can be beneficial

    You can read up on Max Pain here as this site indicates it has been around a while:

    The “Max-Pain Point” Options Analysis technique

  15. DavidB commented on Jan 13

    someone is buying 120 put, what purpose?

    i know they are price like $4-8 each contract.

    its almost impossible that things can move so far, but if things do move, its like a lottery ticket. so who is buying these? is it for speculation?

    Posted by: techy | Jan 13, 2008 5:26:49 PM

    For a lot of people it is like a lottery ticket. It can also be like super cheap insurance. It is a bit different for the January options because those could have been bought up to 2 1/2 years ago as leaps. As they move forward the leaps convert to regular options. 2 1/2 years ago AAPL was trading for $85 so I doubt the person would have bought the $120 puts for $60 or $70 per contract but as AAPL approached $120 they may have bought the options as insurance maybe a year or 6 months ago for $5 per to protect them if AAPL dropped below $120.

    If you had bought AAPL at $100 and it was trading at $130 then $5 for insurance to sell at $120 is a no lose proposition. Conversely, if someone wanted to make some easy cash and thought AAPL was either a good deal at $120 to buy or thought it wasn’t going to go back there they could sell the $120 put option for $5 and pocket the money. The risk to them is if AAPL stock crashes below $120 they would then have to buy the stock at $120 from the put buyer

    I would assume most of the volume is closing contracts but there are some people out there who like to gamble on way out of the money options hoping for a two or three penny uptick like penny stock traders trade. On a play like that it can mean a 20% gain. It rarely happens though. We usually call these people rookie traders who are learning one of the easiest ways to lose their first dollars in the market

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