Analysis to interpret the Nifty closing price at the end of the contract using Option Pain. There are 5 trading days to expire and 7 days in all to expire. If you take a position now, that is, if you sell 4900 Put and 5100 Call (Nifty @ 4988 now)how much profit or loss you will make. According to Max Pain the nifty should end at or around 5000. The analysis is to find whether this strategy works out.
Proposed Position (taken on 21-oct -09)
Sell 4900 Put Price - 34
Sell 5100 Call Price – 27
A complete failure. Market corrected 10% during this week. Lesson learned..Option Pain will not work when the market is extremel bullish or bearish... Loss -123 points.
In fact market ouched high price of 4826 on the last day. But no excuse.
Thanks
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