“The Max Pain theory predicts a stock will close at the strike that destroys the most value from option buyers,” Travis Lewis writes for Seeking Alpha.
“Because of this, Apple usually trades between certain prices and is being artificially held down and at rare times, held up,” Lewis writes. “In essence, the options market is holding AAPL captive; the common stock is now a derivative of the options. The advent of weekly options has exacerbated this problem and, for the most part, has AAPL in lock down mode.”
Lewis writes, “When you try to pick an exact max pain point, e.g, $335.00, well who has the bigger bank account? The person who wrote the $335 calls or the $335 puts? So I don’t try to fine tune it but sell the outside ranges. Call it manipulation, call it perfectly normal delta/gamma hedging, just don’t say options are not controlling AAPL… If you can’t beat ‘em, join ‘em.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]