“If you’re any kind of Apple (AAPL) investor, you should be aware of the chart at [below], even if you don’t know a put from a call and don’t really care to,” Philip Elmer-DeWitt reports for Fortune. “It shows the value in millions of dollars as of Wednesday morning of the outstanding Apple options that expire this Friday, with the magenta bars representing puts (the right to sell 100 shares of AAPL at a certain ‘strike price’) and green representing calls (the right to buy 100 shares).”
“The theory known as Max Pain says that unless news or other events interfere, the stock will close Friday at or very near the chart’s midpoint — in this case $340 — the price that causes the maximum pain to whomever has the most money invested in Apple puts or calls. And, conversely, the maximum profit for whomever sold those options,” P.E.D. reports. “To what extent this is caused by manipulation or ‘natural’ market forces is a matter of fierce debate. What is clear, thanks to some number-crunching conducted overnight by reader Travis Lewis, is that it’s happening.”
Read more in the full article, which further explains why “the tail, in effect, is wagging the dog in a way that has nothing to do with the underlying strength of the company,” here.