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Where to Strike Google to Hit the Most Pins


Know where to find the largest open interest and the most volume.

Okay, let's start this whole pin look-off with Google (GOOG), just like Jimi Hendrix did 40 years ago at Woodstock.

Google is a great place to start, as an academic study last year showed it was the most likely stock in America to pin somewhere. And somewhere painful for options owners.

The chart above shows 30-day IV (in yellow) over the past 2 months. Remember: A good marker for a pin is a cycle-long volatility dip as it suggests market makers and other professionals are net owners of options paper. And they're the gang that hedges most aggressively, so if they own it, they're out there tightening the stock.

You can't see the dates here on this graph, but that big decline in IV was right at last month's expiration -- also the day after Google reported earnings. So we've essentially flatlined since then, neither here nor there if we're trying to guess who owns what. Google stock hasn't moved much either, so it's basically the nearby strikes that are in play. Open interest is on the low side. Looking at the nearby strikes, August 450 calls have the largest open interest and the most volume this week, so that, to me, seems like the most logical strike.

There's a site called Option Max-Pain Calculator that allows you to pop in a name and it will calculate the dollar value area where options owners would see the greatest loss of premium -- The Max Pain level. It shows Google with modestly more pain at 440 than 450.
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