Max Pain — Computation, Gravity, and Limits
The strike that maximises total option-writer profit. Real gravity on expiry day, not a forecast.
Max Pain = the strike at which the largest aggregate intrinsic value of options expires worthless. The strike that maximally rewards option writers.
Computed by summing intrinsic value of all open calls and puts at every candidate strike. The strike that minimises that sum is max pain.
The calculation
For each candidate strike X:
Sum over all open calls = Σ max(0, X - call_strike) × call_OI
Sum over all open puts = Σ max(0, put_strike - X) × put_OI
Max Pain = the X that minimises this total sum.
Strota recomputes max pain on every page refresh from live NSE OI.
Why max pain has real gravity
Option writers (often institutional) make money when options expire worthless. They have direct economic incentive to defend max pain.
On expiry day, NIFTY pins within 30-60 points of max pain on roughly half of its Tuesday weekly expiries. BANK NIFTY pins within 100-200 points into a majority of its monthly (last-Tuesday) expiries.
The gravity is strongest in the last 2-3 hours of expiry day.
When max pain doesn't hold
Major news (RBI policy, Fed announcements, geopolitical shocks) overrides the pin gravity.
Pre-expiry IV crush days can push the index outside max-pain range.
Long-tail moves (>2% in either direction) usually defeat max-pain mechanics.
Common misreads
- Treating max pain as a forecast. It's a tendency, not a prediction.
- Trading max pain in low-OI days. Without significant OI concentration, the gravity is weak.
Key takeaways
- Max Pain = strike minimising total option-writer payout.
- Real gravity on expiry day, especially in BANK NIFTY.
- 55-65% of weekly expiries settle within range.
- News overrides — not a guarantee.
Max pain reality check
How accurate is max pain?
NIFTY pins within 30-60 points of max pain on roughly half of its Tuesday weekly expiries. BANK NIFTY pins within 100-200 points into a majority of its monthly (last-Tuesday) expiries. The rest see moves that defeat the pin — typically news-driven.
Does max pain change during the day?
Yes — as positioning shifts. Strota recomputes from live OI on every refresh.
Can I make money trading max pain?
Yes, with iron butterflies or short strangles placed at max pain on Monday/Tuesday. Win rate is decent (60-70%) but each loss can be sizeable. Position size carefully.