Thursday, March 12, 2009

Goldman Sachs

bye bye...(waves)

101 stop

87: 1st target

79: 2nd target

(max pain for march is 85 fyi)


  1. Hey Erik-

    Nice analysis. I was curious if you've ever delved into max pain analysis based on options sold only in the current month. Any estimate on where GS stands from that perspective? Would it change your assessment if it were significantly higher or is max pain secondary in your analysis?
    --- Adam

  2. gs march max pain is 85

    Max pain is definatly worth watching, when expiration gets close, and i think its a decent ADJUNT to trading (but NOT any more).

    If is matches your chart...GREAT

    If it does NOT match your a lil more cautious.

    It's worth using, but nothing AT ALL to hand your hat on. Just dont "ignore it totally, but dont put ALOT into it" is kinda my experience from its value.

    so yes, if the max pain was 105, then yes...that would reduce my conviction ALOT.

  3. Understood, thanks. I'm referring to max pain in regards to recently sold options (of which there are no online calculators).

    For instance, if we took options sold this month and disregarded options purchased months ago (i.e. many in the 50 - 80 range, most of which will be exercised instead of purchased back at a loss by "market manipulators"), we would probably find a higher max pain and from the looks of it, it would be closer to 105.

    A good example might be an excess of put protection from the new GS longs. Simply, if recent puts outweigh calls at the 100 range, the price might be manipulated to have those puts expire worthless and have it close above 100.

    Hope that made sense. Curious what your thoughts are...?

    Thanks again.

  4. (part 2)

    Probably a better way to put it...

    A "manipulator" sells a call this month ITM. There's a good chance this call was bought back from open interest that he sold a few months ago. So, he has already realized a profit.

    Extrapolate this to the entire open interest. Can't these realized profits (which are many in GS' recent run) add significantly to a divergence upward from max pain? Such would be the reason to analyze only recent options, and maybe a reason to proceed with caution near option expiration.

  5. I get ya, the more recent the more meaningfull, i respect that.

    But the overall pay out damage from the writers is based on the TOTAL options (irregardless of recent or not recently purchased)

  6. Erik,

    Nice work. I've been reading the comments on Kenny's board and find it difficult to believe Kenny may change his bear thinking into bullishness. I think T/A and EW is great, but also the bond market tells us alot also...I know you read "the pragmatic capitilatlist" and thought the following two articles are very informative.