How max pain is calculated
- Take the open interest of every call and every put for one expiry.
- Pick a possible expiry level, usually each strike in turn.
- For that level, work out what each open call and put would be worth: a call is worth the level minus its strike if positive, a put the strike minus the level if positive.
- Multiply by the open interest and add everything up.
- Repeat for each level. The level with the smallest total is max pain.
The idea behind it is that most options expire worthless and that the price tends to settle where the fewest options pay out. Whether the market is pulled there, or simply ends up there because open interest clusters around the current price, is the open question.
A worked example on a model Nifty chain
Seven strikes with model open interest in thousands of contracts:
| Strike | Call OI | Put OI |
|---|---|---|
| 24,700 | 42 | 112 |
| 24,800 | 61 | 171 |
| 24,900 | 88 | 118 |
| 25,000 | 120 | 125 |
| 25,100 | 134 | 84 |
| 25,200 | 186 | 46 |
| 25,300 | 97 | 33 |
Total payout to option holders at each expiry level, in thousands of contracts × points:
| Nifty at expiry | Total payout | |
|---|---|---|
| 24,700 | 1,54,600 | |
| 24,800 | 1,01,100 | |
| 24,900 | 70,800 | |
| 25,000 | 61,100 | Lowest: max pain |
| 25,100 | 75,900 | |
| 25,200 | 1,12,500 | |
| 25,300 | 1,72,300 |
Max pain is 25,000. At that level the 24,700 to 24,900 calls pay out on their intrinsic value and the 25,100 to 25,300 puts pay out on theirs, but the total is smaller than at any other level. Move the expiry to 25,200 and the heavy call open interest at 25,000 and 25,100 starts paying, so the total nearly doubles.
Max pain, OI walls and the PCR
Max pain usually sits between the strike with the most put open interest (24,800 here) and the strike with the most call open interest (25,200). Those walls are read as support and resistance, and the max pain level as the point of balance between them. The put-call ratio summarises the same chain: 0.95 on these seven strikes. All three are different readings of one table of open interest, and they move together as positions change. The Nifty PCR guide works through the walls, the ratio and how they shift during the day.
Why traders watch it
- Expiry-day bias. Some traders expect the index to drift towards max pain in the last hours, as sellers defend their strikes and buyers close positions.
- Strike choice for sellers. Strikes far from max pain are seen as safer to sell.
- A sanity check. If the index is far above max pain with a day left, the chain says most call buyers are winning, which is unusual.
Why it is not a forecast
Max pain measures where positions are, not where the price is going. Three things limit it:
- It changes every day. Open interest moves as traders open, close and roll positions, so the max pain level can shift by several strikes during expiry week.
- It counts contracts, not intent. Much of the open interest belongs to hedgers and spread traders whose profit does not depend on the option expiring worthless.
- The index does not need to obey it. Large moves on news or flows go straight through max pain levels, and studies of index expiries find the pull, if any, to be small.
Use it as one input alongside the OI walls, the PCR and price action, not as a target.
How traders use max pain in rules
| Rule | How it works |
|---|---|
| Expiry-day filter | On expiry day, take short-premium trades only when the index is within a set distance of max pain |
| Strike selection | Sell strikes beyond the OI walls on either side of max pain |
| Drift trade | In the last two hours of expiry, trade towards max pain only if the index is already moving that way |
| Avoidance | Skip expiry-day entries when max pain has moved by more than two strikes since the morning |
Each of these can be backtested, and the test should include the days when the index ignored max pain entirely.
Where to see max pain
Most option chain tools show max pain for the selected expiry. QuantPower's chain shows it above the strikes, next to the PCR and the expected move, and recalculates it as open interest changes during the day; see the option trading app. To check it by hand, download the chain's open interest and run the formula above in a spreadsheet.
Related terms
- Put call ratio meaning: the ratio of put to call open interest
- Expiry meaning: when options settle and max pain matters most
- Strike price meaning: the levels max pain is calculated across
- ITM ATM OTM meaning: which options pay out at a given level
Learn more
- Nifty PCR: open interest, the walls and the ratio on a model chain
- Expiry day trading strategies: how expiry sessions behave
- Option chain: reading open interest on the chain
Frequently asked questions
What is max pain in Nifty?
The Nifty level at which the open calls and puts for an expiry would be worth the least in total. It is calculated from open interest and changes as positions change.
Does Nifty expire at max pain?
Sometimes close to it, often not. Open interest clusters around the current price, so max pain is usually near the index anyway; large moves on news go straight through it.
Where can I find max pain?
In option chain tools that calculate it from open interest, including QuantPower's chain, or by running the formula on the chain's open interest yourself.
Is max pain useful for intraday trading?
Mainly on expiry day, as a filter or a bias. On other days the level moves too much, and too much time is left, for it to say much about the session.
Who benefits at the max pain level?
Option sellers as a group, who keep the most premium. Buyers as a group lose the most, which is where the name comes from.