Option Pain or Strike Price Pegging focuses on the idea that towards expiration date the price of a stock will move towards its strike price thus inflicting most losses (pain) to the majority of option traders as all parties with high investments try to steer the stock price towards their calls or puts to minimize their losses.
Max Pain calculations for Arena Friday July 5th 2013 is $8.
All good points Dan. Patience for those unsure at this point is important. Wall Street works generally in the opposite direction of the eventual location that equity is headed. It's that method of operation that amplifies their wealth. Since they control all the critical points along the way, since they have established their players in the important spots, since they have endless capital compared to retail then its a given this will occur. Here can be no different. These contrarian indicators are upside down thinking to the brain and can be quite confusing unless you are a player actively involved with their process. The is an unwritten code that this cannot be spoken about. It's in these actions that make this a screaming buy. I see the hedge now has a 10K marker on the 7.20 level AH's. That indicates to me there was little retail buying interest after hours at least until now. I think we revisit the low of today on Friday if there's an absence of news or until script numbers become available. We will get there but not without everything they can do to get at retail shares at as low a price as they can muster with their tools.
The number of options expiring Friday is fairly small. I would put max pain much closer to 7.50. The tendency of options to wash out on expiration is not so much the effect of large traders driving the price to a certain point as it is the gravitational effect of the options themselves. The huge overhang of July 20 calls virtually guarantees, for example, that the stock will close around 7 that day.