Advanced Max Pain

What is Advanced Max Pain?

Advanced Max Pain is an advanced analysis of Max Pain. The concepts used in this analysis are Zone, Max Pain and Weighted Pull.

Zone

The zone is the ranges that the price will likely navigate to so that option sellers (most likely market makers) can minimize losses and maximize profit.
If this sounds similar to max pain that’s because they are similar but not quite the same. Max pain is not perfect and if you are a investor that watches max pain you probably have noticed that the stock price very seldom hits this number. Actually for option sellers hitting that number is very hard as factors within the market change frequently. The price will most likely gravitate into a range as these actors nudge the price in the direction that is more advantageous. This range is what we refer to as “Zone” in Advanced Max Pain.

Max Pain

Max Pain is the price at which market mover loss the less money on option sells.

Weighted Pull

Weighted pull is the calculation on where the price will most likely pull to. There are three areas of concern in this concentration, down, choppy, and up we could of used bearish, neutral, or bullish but we decided to KISS (Keep It Simple Stupid). .

Drawbacks

With anything investing there are drawbacks. Nothing is perfect and I have to make that clear here.

Like always, Invest at you own risk!

How can this help with trading?

Easy, if the underlying price of the stock is below or above the zone ranges then we can assume that the price will navigate lower or higher to get within the zone. Also note the weighted pull to analyze which way the stock will likely go. Either way you can gain a more bullish or bearish outlook and trade accordingly or expect chop for the day, Whatever strategy your comfortable with use and this tool can serve as a companion.

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