Nifty does not settle at max pain: across 120 expiries, the prior close was the better guide

By Strota Newsroom · 2026-10-23 · How Strota reports

The Nifty does not drift toward max pain as expiry approaches. Strota tested the idea across 120 Nifty expiries between July 2024 and October 2026, and on the day before settlement the opposite showed up: the previous close was a significantly better guide to where the index finished than max pain was. Max pain landed closer on only 47 of those 120 expiries, or 39.2%, and that shortfall is unlikely to be luck (p = 0.022).

That matters because max pain is a widely repeated idea in Indian derivatives talk, usually with the implication that the index is being quietly herded toward it as expiry nears. If the claim held, it would be a genuinely useful forecasting tool. In this sample it was not even as good as assuming nothing happens.

First, what the term means. Picture every open option contract on the index settling at once. For each possible strike you can add up how much the buyers of calls and puts would collect in total. Max pain is the strike where that total payout is smallest, the price at which buyers as a group are worst off and writers keep the most premium. The popular story says large option sellers have the muscle and the motive to push the settlement toward that level.

Strota built the test from NSE's daily F&O bhavcopy, which records open interest strike by strike, running from 8 July 2024 to 19 October 2026. Max pain was recalculated every session for the nearest expiring contract. The span covers both weekly and monthly expiries: 120 for the Nifty and 43 for Bank Nifty.

The yardstick was deliberately humble. For each expiry, the study took the max pain reading one, three and five sessions ahead of settlement and measured how far it sat, in percent, from the final expiry-day close. It then did the same for the index level on that earlier day, a forecast that simply says the market stays put. Whichever was nearer won the round. A reading only counted when the nearest expiry on that day was the same contract, so the five-session comparison covers 88 Nifty expiries rather than the full set. A two-sided binomial test then asked whether max pain won more or less often than a coin flip at 50%.

Across every horizon for the Nifty, max pain failed to beat the do-nothing forecast. With one session to go, its average miss was 0.67% against 0.60% for the previous close. Three sessions out the misses were 1.12% and 1.04%, with max pain closer in 56 cases, or 46.7%, a gap that is statistically indistinguishable from chance (p = 0.523). Five sessions out the two were essentially tied, 1.33% for max pain against 1.34% for spot, and max pain won 41 times, or 46.6% (p = 0.594).

Bank Nifty offers a smaller sample but tells the same story. One session ahead, max pain missed by 0.79% on average while spot missed by 0.57%, and max pain was nearer in just 17 of 42 cases. At three sessions it won only 14 of 41, or 34.1%, with p = 0.06, close to significant in the wrong direction for the theory. The single horizon where max pain came out ahead more often than not was five sessions, at 22 of 38 or 57.9%, yet its average miss of 2.12% was still wider than spot's 2.00%, and the result fell well short of significance (p = 0.418). None of the three Bank Nifty comparisons favoured max pain at the 5% level.

Put plainly: what survived is the boring baseline. The level the index already traded at was the better or equal guide in almost every cut of the data. What failed is the pinning story, at least in the form most people repeat it, where max pain read days in advance tells you where expiry will land.

The study is candid about its edges. It rests on just over two years of daily data, which is short for a market structure question. Because it uses end-of-day snapshots, any pinning that happens in the final hour of an expiry session would be invisible to it. Open interest itself can reshuffle sharply on expiry morning, so a max pain figure built from the previous evening may already be stale by the time trading opens. And the benchmark here is a naive forecast, not a trading strategy, so the result speaks to whether max pain predicts the settlement, not to whether anyone could have profited either way.

Within those limits the answer is clear. Over this stretch, the strike where option buyers collectively lose the most did not act as a magnet for the Nifty or Bank Nifty settlement, and on the last day before expiry it was measurably worse than simply looking at where the index already stood.

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