I keep hearing about max pain theory in trading but I really don’t understand its impact on my trades.
I’ve read a few posts but they just confuse me more. Does it matter for regular traders or is it just a theory?
I want to know if I should pay attention to this when making trades.
Max pain theory indicates where most options expire worthless. This usually aligns with price levels that create losses for option holders.
Market makers push prices toward these points before expiration to maximize profits from premiums.
For regular trading, it offers insights about potential price movements near expiration dates. However, do not depend solely on it since other factors tend to be more important.
Max pain rarely affects my short term trades on Pocket Option honestly.
Options max pain affects underlying asset prices near expiry dates.
• Shows where most option contracts lose value
• Creates temporary price pressure
• Primarily impacts weekly/monthly expirations
Useful for timing entries around major expiry dates.
Honestly, max pain burned me hard when I first learned about it.
I thought I could predict every expiry move by watching where options would expire worthless. Lost three trades in a row on SPY trying to fade the max pain level.
Turns out it works sometimes but news and momentum often overpower it completely.