In this thread I will briefly explain the relationship between the price of #BTC and the maximum-pain for options. This can be an interesting indicator to detect possible corrections in the price of the underlying due to institutional manipulation.
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Let's see what is the maximum-pain (m-p) in Options.
The m-p is the price level, in which the issuer of the options maximizes its benefits according to the volume of calls/puts at the expiration of the contract. The m-p can evolve over time until the options expire.
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The m-p is the price level, in which the issuer of the options maximizes its benefits according to the volume of calls/puts at the expiration of the contract. The m-p can evolve over time until the options expire.
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Why can we use the m-p?
If we take into account that the counterpart of the purchase of calls/puts are the institutions, they will defend certain price levels to maximize profits. Therefore they can manipulate the price of the underlying to move it to the level of m-p
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If we take into account that the counterpart of the purchase of calls/puts are the institutions, they will defend certain price levels to maximize profits. Therefore they can manipulate the price of the underlying to move it to the level of m-p
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How effective can it be?
According to the analyzed sample, a price difference with the m-p β₯ 25%Β±7% has a high probability of occurrence (81%) that the price approaches to m-p. The Open Interest (OI) for expiration is another important variable.
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According to the analyzed sample, a price difference with the m-p β₯ 25%Β±7% has a high probability of occurrence (81%) that the price approaches to m-p. The Open Interest (OI) for expiration is another important variable.
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Important.
The m-p should be taken as another indicator, but it should not be used in isolation. In the case where a βblack swan eventβ occurs in the market it can be invalidated. An example of this is the crash of last May.
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The m-p should be taken as another indicator, but it should not be used in isolation. In the case where a βblack swan eventβ occurs in the market it can be invalidated. An example of this is the crash of last May.
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You can consult the m-p, Open Interest and other parameters at: app.laevitas.ch
Take into account that there are several exchanges and that each one will have its level of m-p.
In the case of Deribit (For example) access this address: app.laevitas.ch
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Take into account that there are several exchanges and that each one will have its level of m-p.
In the case of Deribit (For example) access this address: app.laevitas.ch
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