Fact Checking
Well-Known Member
I generally feel like people referencing things like Max Pain never bother to notice it never works.
The max pain pricing phenomenon seems to be working reasonably very well when open interest is significant and the Friday is reasonably quiet - but those are only certain expiries on TSLA: the quarterlies, but also the yearly options where both shorts and longs tend to gang up well in advance - these also tend to be the most traded, most liquid expiries.
For example the September 21 expiry had a huge open interest of 353K PUTs and 171K calls and the closing price came within $1 of the max pain price, and there was some significant volume in the last minute before closing where market makers appeared to have been flushing their inventory.
Most other expiries are 'boring' in this regard and I agree with you that in the typical case fundamentals, the macro environment, technical trends and of course big buyer/seller flows would overwhelm any max pain forces. This is the case for 90% of the TSLA options expiry dates.
Also note that I disagree with the very common anthropomorphizing interpretation of the 'max pain' phenomenon: IMO the force is really just the net effect of delta hedging inventory movements of asymmetrically positioned options market makers (there are dozens), not some 'intentional' price action intended to 'hurt' anyone explicitly.
So in that sense I'd rather define it as the 'equilibrium price of delta-hedge inventory management in multi-market-maker options markets' or so, but it's quite a mouthful and nobody would recognize what I mean.
So, with all that in mind I'd expect the price action leading up to January 18 to be truly spectacular one way or another: there's no clear max pain equilibrium price visible yet and about ~10 million shares heavy TSLA inventory will be sloshing around in the fuel tanks during max-Q.
February 15 will probably have very little max pain price effect, with just ~25k of open interest currently.
Ah, and tomorrow's (Oct 19) expiry probably explains the overtime work of Dana and Linette as well to manufacture FUD and yesterday's attempted bear raid: 264K PUTs, 151K CALLs - every $1 dip is worth millions:
Code:
PUT $ 25: 22,228, CALL $ 25: 2
PUT $ 30: 4,582, CALL $ 30: 0
PUT $ 35: 5,028, CALL $ 35: 0
PUT $ 40: 6,469, CALL $ 40: 0
PUT $ 45: 4,604, CALL $ 45: 0
PUT $ 50: 67,499, CALL $ 50: 2
PUT $ 55: 343, CALL $ 55: 0
PUT $ 60: 572, CALL $ 60: 8
PUT $ 65: 243, CALL $ 65: 0
PUT $ 70: 964, CALL $ 70: 0
PUT $ 75: 6,029, CALL $ 75: 0
PUT $ 80: 356, CALL $ 80: 9
PUT $ 85: 824, CALL $ 85: 0
PUT $ 90: 1,134, CALL $ 90: 0
PUT $ 95: 1,073, CALL $ 95: 0
PUT $100: 9,592, CALL $100: 1
PUT $105: 521, CALL $105: 0
PUT $110: 606, CALL $110: 1
PUT $115: 444, CALL $115: 0
PUT $120: 2,117, CALL $120: 1
PUT $125: 1,535, CALL $125: 0
PUT $130: 1,735, CALL $130: 1
PUT $135: 1,241, CALL $135: 0
PUT $140: 1,448, CALL $140: 3
PUT $145: 942, CALL $145: 1
PUT $150: 6,229, CALL $150: 5
PUT $155: 637, CALL $155: 0
PUT $160: 1,260, CALL $160: 30
PUT $165: 1,126, CALL $165: 12
PUT $170: 2,739, CALL $170: 4
PUT $175: 4,937, CALL $175: 1
PUT $180: 3,938, CALL $180: 4
PUT $185: 1,051, CALL $185: 2
PUT $190: 1,743, CALL $190: 2
PUT $195: 1,080, CALL $195: 9
PUT $200: 11,253, CALL $200: 268
PUT $205: 2,173, CALL $205: 24
PUT $210: 1,911, CALL $210: 6
PUT $215: 2,161, CALL $215: 26
PUT $217: 125, CALL $217: 0
PUT $220: 3,015, CALL $220: 324
PUT $222: 122, CALL $222: 7
PUT $225: 2,881, CALL $225: 107
PUT $227: 287, CALL $227: 27
PUT $230: 2,596, CALL $230: 141
PUT $232: 437, CALL $232: 65
PUT $235: 1,391, CALL $235: 57
PUT $237: 336, CALL $237: 40
PUT $240: 4,833, CALL $240: 236
PUT $242: 481, CALL $242: 436
PUT $245: 1,674, CALL $245: 230
PUT $247: 956, CALL $247: 458
PUT $250: 8,558, CALL $250: 1,060
PUT $252: 1,279, CALL $252: 459
PUT $255: 2,609, CALL $255: 682
PUT $257: 1,410, CALL $257: 656
PUT $260: 4,336, CALL $260: 1,766
PUT $262: 964, CALL $262: 685
PUT $265: 2,014, CALL $265: 1,543
PUT $267: 655, CALL $267: 993
PUT $270: 4,521, CALL $270: 4,417
PUT $272: 512, CALL $272: 1,479
PUT $275: 3,129, CALL $275: 3,474
PUT $277: 559, CALL $277: 1,832
PUT $280: 4,012, CALL $280: 6,513
PUT $282: 279, CALL $282: 3,311
PUT $285: 1,145, CALL $285: 3,657
PUT $287: 216, CALL $287: 1,073
PUT $290: 2,218, CALL $290: 6,839
PUT $292: 323, CALL $292: 1,005
PUT $295: 1,253, CALL $295: 2,270
PUT $297: 296, CALL $297: 830
PUT $300: 5,607, CALL $300: 9,014
PUT $302: 539, CALL $302: 902
PUT $305: 802, CALL $305: 1,972
PUT $307: 454, CALL $307: 1,229
PUT $310: 3,014, CALL $310: 5,734
PUT $312: 161, CALL $312: 677
PUT $315: 554, CALL $315: 2,419
PUT $317: 85, CALL $317: 584
PUT $320: 1,496, CALL $320: 4,991
PUT $325: 1,004, CALL $325: 6,356
PUT $330: 1,083, CALL $330: 5,277
PUT $335: 83, CALL $335: 1,251
PUT $340: 1,656, CALL $340: 4,593
PUT $345: 100, CALL $345: 849
PUT $350: 1,617, CALL $350: 9,973
PUT $355: 43, CALL $355: 2,413
PUT $360: 381, CALL $360: 4,313
PUT $365: 441, CALL $365: 846
PUT $370: 579, CALL $370: 1,470
PUT $375: 40, CALL $375: 1,184
PUT $380: 280, CALL $380: 2,359
PUT $385: 225, CALL $385: 798
PUT $390: 207, CALL $390: 1,603
PUT $395: 17, CALL $395: 613
PUT $400: 160, CALL $400: 4,676
PUT $405: 50, CALL $405: 382
PUT $410: 180, CALL $410: 2,188
PUT $415: 25, CALL $415: 930
PUT $420: 114, CALL $420: 2,584
PUT $425: 3, CALL $425: 491
PUT $430: 9, CALL $430: 546
PUT $435: 7, CALL $435: 656
PUT $440: 5, CALL $440: 651
PUT $445: 0, CALL $445: 250
PUT $450: 9, CALL $450: 1,531
PUT $455: 0, CALL $455: 201
PUT $460: 0, CALL $460: 1,261
PUT $465: 0, CALL $465: 200
PUT $470: 0, CALL $470: 200
PUT $475: 0, CALL $475: 130
PUT $480: 0, CALL $480: 479
PUT $485: 0, CALL $485: 11
PUT $490: 0, CALL $490: 420
PUT $495: 0, CALL $495: 26
PUT $500: 0, CALL $500: 1,075
PUT $505: 0, CALL $505: 114
PUT $510: 0, CALL $510: 369
PUT $515: 0, CALL $515: 3
PUT $520: 1, CALL $520: 182
PUT $525: 0, CALL $525: 50
PUT $530: 0, CALL $530: 165
PUT $540: 1, CALL $540: 412
PUT $550: 0, CALL $550: 1,730
PUT $560: 0, CALL $560: 3,959
PUT $570: 0, CALL $570: 665
PUT $580: 0, CALL $580: 523
PUT $590: 0, CALL $590: 423
PUT $600: 0, CALL $600: 4,710
PUT $610: 0, CALL $610: 0
PUT $620: 0, CALL $620: 10
PUT $630: 0, CALL $630: 0
PUT $640: 0, CALL $640: 1
PUT $650: 0, CALL $650: 1,067
Note the significant near-the-money PUT interest in keeping the TSLA price below $280, with incremental advantages in keeping it below $270, $260, $250 if possible, with an almost quadratic increase in short seller income as these barriers of support are broken.
Manufacturing a drop from $280 to below $250 would bring an incremental windfall of $50m for about 35K PUT options contracts in that price range, and another $3.5m for every $1 below that price.
There's also about 25K PUT options at higher price levels - so the per $1 gain below $250 is about $6m per $1 drop - quite the profit motive to make that happen through whatever means necessary ...
Anyway, tomorrow's maximum pain price point is around $275-$285 currently, centered around $280, so unless something big happens in the fundamental or macro space, or shorts use up a lot of dry powder with the risk of holding it across the weekend I'd expect the TSLA price to trend towards that. Or not!
And I guess the SEC is sleeping at the wheel again - or are they planning to give Tesla anti-investor shorts a helping hand again?
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