Options Max Pain Theory Explained & How People Trade It (just the basics). // trading calculator pin - YouTube

Options Max Pain Theory Explained & How People Trade It (just the basics). // trading calculator stocks calls puts expiration payne charts strategy maximum peg pegged pin pinned level david moadel

a very brief introduction to Max Payne so here we go if you are familiar with

options and you feel that large institutions are manipulating stock

prices then you might consider taking advantage of the Max Payne Theory the

Max Payne Theory claims that as option expiration approaches stock prices will

tend to get pushed toward the price at which the greatest number of options in

terms of dollar value will expire worthless in other words the theory

holds that when expiration approaches stock prices will gravitate toward the

price that will cause both call and put buyers the most pain since their options

would expire worthless at that Max Payne price thus Max Payne is the price at

which option holders would lose the most money and option writers or sellers

would profit the most this is generally going to be the strike price with the

greatest number of open contracts Max Payne is only a theory and can't be

relied on to work all of the time however the Max Payne theory is

supported by the fact that there are very large institutional options sellers

who may have the ability to manipulate stock prices thus it is possible that

they will push a stock price toward the max pain point so that their option

righting trades will benefit the most when expiration is near and a stock

price gravitates toward the max pain price some people will say that it is

being pegged or pinned it is difficult to prove whether Max Payne pinning is

real or coincidental but stock and option traders can still benefit from

being aware of Max Payne especially when the option expiration dates are near so

this example is from maximum pain calm and it shows the max pain for MU which

is micron stock as being 27 dollars and you know that's not necessarily the

price right now this is just when they made the chart all right so here are all

of the all the puts in red all the calls and green and right here where the most

options would expire worthless both calls and puts upon expiration

and by the way expiration is usually it's going to be a Friday although 4sp

why sometimes it's a Wednesday but we're usually referring to four o'clock p.m.

Eastern Time on Friday is when expiration generally occurs and this

effect the Max Payne effect might be even more powerful for monthly

expirations as opposed to only the weeklies okay so as we can see here

according to this website the Max Payne would be $27 the strike price of 27

where the greatest number of calls and puts in terms of dollar value would

expire worthless here's another example from maximum pain

maximum pain calm showing the max pain for Apple as being one hundred fifty

seven dollars and fifty cents for the strike price for this expiration cycle

for options all right right about there all right you've got the puts in read

the calls in green and right there that's the max pain

there is really no need to calculate Max Payne yourself I suppose you could do it

but since there are websites and apps that will do it for you all right now

for apps you could probably go to Google Play or you know Apple the App Store

wherever you like and you can do a search for that for a max pain

calculator I know of a couple websites where they will calculate it for free

right now at least I cannot guarantee it'll be free in the future but as of

this video one is maximum pain com there's a

website here and also option is tix.com all right so you can type these web

addresses into your browser or just type max pain calculator into a search engine

and you'll probably get there one way or another if you want to test the theory

out and please be careful with this all right yeah this is something you should

not do with large amounts of money it's best to paper tray paper trade any

theory first all right so do not put a lot of money into this if you're going

to test it out or if you're going to do it at all in fact it's you're better off

really paper trading it with just play money fake money at first you can make

adder but if you want to do this you can make a directional bet with small

amounts of stocks or options the idea is to bet that the stock price

when there is only a short time left until option expiration will tend to

move toward the max pain some traders will swear by this method

but you will want to do your own research before trying anything out for

yourself so the next time you see the price of a stock magically or

magnetically moving toward a round number in the final hour before option

expiration just remember the words Max Payne

I hope this was helpful and helpful for you and informative please give this

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subscribed thank you so much I really appreciate it and if you have questions

about trading investing stock options or anything relating to these things you

can email me at any time my email address is David Modell at gmail.com

thank you so much for watching and listening and I'll talk to you again

soon