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.
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.
Option writers (often institutional) make money when options expire worthless. They have direct economic incentive to defend max pain.
On weekly expiry day, NIFTY pins within 30-60 points of max pain on ~55% of Thursdays. BANK NIFTY pins within 100-200 points on ~65% of Wednesdays.
The gravity is strongest in the last 2-3 hours of expiry day.
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.
NIFTY pins within 30-60 points of max pain on ~55% of Thursdays. BANK NIFTY within 100-200 points on ~65% of Wednesdays. The remaining ~35-45% see moves that defeat the pin — typically news-driven.
Yes — as positioning shifts. Strota recomputes from live OI on every refresh.
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.