“To ordinary investors, the trading in Apple (AAPL) shares last week must have looked a little crazy. On Monday, when the Dow was up, the stock fell, only to shoot up $9.98 (3.17%) the next day. On Thursday, when the Dow was down, the stock was up $8.62 (2.67%). If Apple could have held on to those gains, it would have registered a rare $15.91 bump from Monday’s close,” Philip Elmer-DeWitt reports for Fortune. “But on Friday, in a pattern that Apple investors find depressingly familiar, the shares fell again and closed at $326.35 — just about where they ended up the previous week.”
“To AAPLPain’s Travis Lewis, who has been following the trade in Apple weekly options since they began exactly one year ago, it all made perfect sense. Apple almost had to close somewhere between $325 and $330 — the so-called Max Pain range — because there was too much money at stake to have it end the week anywhere else,” P.E.D. reports. “According to the theory of Max Pain, a stock in which options are traded will tend to close on the day the options expire, absent a major news event, at the point that causes the most pain to people buying options and the maximum profit to those selling them.”
P.E.D. reports, “It certainly seems to be true for Apple, whose options last week (as they are most weeks) were the most heavily traded of any U.S. stock. In 52 weeks, Apple has closed within $1 of Max Pain 39 times.”
Read more in the full article here.
[Thanks to MacDailyNews Readers “Dan K.,” “Connor MacBook,” and “Jax44” for the heads up.]