Max Pain Zone?

Looking at the graph on last night's blog, I was thinking perhaps instead of "Max Pain Point", we should think about "Max Paint Zone". The top of the graph was a bit flat and the price should be able to move a little bit to the left or right without too much of an impact.

But how much of an impact is "not too much"? We can only guess. What about $30 million? That sounded like chicken change to our option writers, right? Let's see how far can the QQQQ price deviate from the max pain point if we allow for $30m allowance one way or another.



The above graph is a recent QQQQ chart with the "Max Pain Zone" of the last and coming few months painted in. The horizontal line of the pink crosses refers to each month's max paint points, while the vertical line covers the max pain zone if we allow for $30m freedom.

For December, the price action was well within the range of the pink cross. For November, the price closed below the cross (I think the option writers made $70m less money that month). However, being able to see the cross way down there as early as late October should have been useful.

For January, the cross is also "way down there".

(BTW, I drew a thin cross for Feb., but because of the slight volume, the Feb cross should be taken with a grain of salt.)