Friday, December 3, 2010

First Solar Options "Max Pain" at $130 (FSLR)

The stock is at $131.04, down 43 cents.
Although there are two weeks to go in the December's it is time to start thinking about where the stock might get pinned.*
Here's one of the public "pain calculators" and their brief description:
What is Option Pain?
In the option market, wealth transfer between option buyers and sellers is a zero-sum game. On option expiration days, the underlying stock price often moves toward a point that brings maximum loss to option buyers. This specific price, calculated based on all outstanding options in the market, is called Option Pain. Option Pain is a proxy for the stock price manipulation target by the option selling group.
We're still thinking "long ain't wrong" on the run-up to the Dec. 14  2011 Guidance Conference Call on Tuesday, December 14, 2010. The options expire three days later.

IMPA, Rio de Janeiro
Tenth Annual Workshop on Derivative Securities and Risk Management
Center For Applied Probability, Columbia University
A Market-Induced Mechanism For Stock Pinning
(23 page PDF)