Friday, February 20, 2009

SPY and IWM Options Action Today, Max Pain in Practice

Max pain numbers for SPY (84) and IWM (48) are significantly higher than the current price of the underlying. The tables below show what will happen for every $1 increase of both IWM and SPY in terms of number of calls that become in-the-money and number of puts that become out of the money, based on the current prices.

Based on these numbers, it is clearly more convenient for the market makers (options sellers), to have IWM and SPY go up today. We shall see what happens by the end of the day.

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