International Business Machines (IBM)
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Maximum pain theory suggests that upon expiration most options will expire worthless. The max pain price, which corresponds to the strike price with the highest concentration of open options call and put contracts, is the price at which options holders will suffer the most significant financial losses at expiration. Options sellers will try to drive the underlying towards this max pain price so that they can reap maximum reward upon options expiration.
Options skew or volatility skew is a measure of implied volatility across strike prices and can provide insights into market sentiment. In very general terms, skew can be used to interpolate forthcoming market movement. A downward sloping skew suggests potential downside price movement, and conversely an upward slope suggests upside bias and expectations of price increases. A flat volatility skew suggests the market expects little movement, and a smile skew implies a large forthcoming price movement in either direction.
Options skew or volatility skew is a measure of implied volatility across strike prices and can provide insights into market sentiment. In very general terms, skew can be used to interpolate forthcoming market movement. A downward sloping skew suggests potential downside price movement, and conversely an upward slope suggests upside bias and expectations of price increases. A flat volatility skew suggests the market expects little movement, and a smile skew implies a large forthcoming price movement in either direction.
