Been looking into max pain theory for SPY options lately. Not sure how reliable it is for predicting price movements.
Anyone here use max pain levels in their trading strategy? Curious about your experiences and if you find it helpful or just another indicator to consider.
Max pain’s been hit or miss for me. Last month, I ignored it and got burned on a TSLA trade.
Now I use it as a sanity check, especially on Fridays. Helped me avoid a bad AAPL position last week.
But it’s just one tool. Gotta combine it with price action and volume to get the full picture.
Max pain theory can be useful, but it’s not a magic bullet. Been watching it for a few months now.
Sometimes SPY gravitates towards max pain, other times it doesn’t. Best to use it alongside other indicators and price action.
Personally, I look at max pain as one piece of the puzzle. It gives a sense of where big money might want price to land.
Max pain: auxiliary indicator, not primary. Accuracy varies.
Key points:
• Use with volume, order flow
• More reliable near expiry
• Can shift rapidly with news
• Backtest before implementation
Max pain’s not the holy grail, but it’s worth keeping an eye on. I’ve found it more useful for weekly options than monthlies. Trick is to watch how price reacts as it approaches max pain levels. Sometimes it’ll bounce right off, other times it’ll slice through like butter.
Key is combining it with volume profile and order flow. That’ll give you a better read on whether big players are defending certain levels or not. Just remember, max pain’s based on old data. Markets can shift fast, especially with news or big economic reports.
I check max pain levels daily. SPY hit it 62% of expiry days last quarter. Good extra data point.