Max pain is the settlement price at which option buyers, taken together, would collect the least at expiry, and option writers would pay out the least. It is worked out from the open interest at every strike.
How max pain is calculated
- Pick a possible settlement price, S. Use each strike in turn.
- For every call strike K below S, the call finishes in the money by S − K. Multiply that by the call OI at K.
- For every put strike K above S, the put finishes in the money by K − S. Multiply that by the put OI at K.
- Add it all up. The total is what writers would pay if Nifty settled at S.
- Repeat for every strike. The strike with the smallest total is max pain.
Payout(S) =Σ max(0, S − K) × call OI+ Σ max(0, K − S) × put OI
Units
The totals are in index points times contracts, not rupees: a strike that finishes 100 points in the money with 1,000 contracts open adds 1,00,000 points × contracts. Multiply by the lot size to turn a total into rupees. Every strike is scaled by the same amount, so the ranking, and therefore max pain, stays the same.
Worked example on the sample chain
Settling at 25,100, calls below it would pay out 5.21 crore points × contracts and puts above it 5.37 crore, a total of 10.58 crore points × contracts: the smallest of any strike. One strike lower, at 25,050, the total is 11.09 crore; one strike higher, at 25,150, it is 10.72 crore. So max pain for the sample is 25,100, with spot at 25,180.
| Settlement | Calls pay (crore) | Puts pay (crore) | Total (crore) |
|---|---|---|---|
| 25,050 | 4.07 | 7.01 | 11.09 |
| 25,100 | 5.21 | 5.37 | 10.58 |
| 25,150 | 6.59 | 4.13 | 10.72 |
Moving the settlement up adds to what calls pay and takes away from what puts pay. Max pain is where the two changes balance out. Here it sits 80 points below spot.
In index points times contracts, for the sample chain. The shortest bar is max pain.
Show the numbers
| Settlement | Total payout |
|---|---|
| 24,550 | 45,73,72,000 |
| 24,600 | 40,34,16,500 |
| 24,650 | 35,37,82,000 |
| 24,700 | 30,64,05,000 |
| 24,750 | 26,41,05,000 |
| 24,800 | 22,46,42,500 |
| 24,850 | 19,21,19,500 |
| 24,900 | 16,28,81,500 |
| 24,950 | 13,95,57,000 |
| 25,000 | 11,99,31,500 |
| 25,050 | 11,08,64,500 |
| 25,100 | 10,57,91,500 |
| 25,150 | 10,71,90,000 |
| 25,200 | 11,26,38,500 |
| 25,250 | 12,58,27,500 |
| 25,300 | 14,31,15,000 |
| 25,350 | 16,71,97,000 |
| 25,400 | 19,49,49,000 |
| 25,450 | 22,80,21,500 |
| 25,500 | 26,42,98,500 |
| 25,550 | 30,90,75,500 |
| 25,600 | 35,67,34,500 |
| 25,650 | 40,96,46,000 |
| 25,700 | 46,47,76,500 |
| 25,750 | 52,43,65,500 |
| 25,800 | 58,57,68,500 |
What max pain can’t tell you
- It assumes every open contract is held to expiry. Many are closed well before.
- It ignores the premium writers already received and any hedges they hold.
- It moves as open interest moves, so each figure is a snapshot of one moment.
- Whether the index tends to settle near max pain is debated. Treat it as a description of where open positions would cost writers least, not as a target.
Max pain and the put-call ratio both summarise the chain’s open interest. To see which strikes are in the money at a given settlement, read ITM, ATM and OTM.
Related lessons
- Open interest (OI) in the option chain
- PCR (put-call ratio) in the option chain
- ITM, ATM and OTM strikes in the option chain
Open the sample chain to select any number and read what it means.
Educational content, not investment advice. Every figure here comes from a synthetic sample chain, not live prices. See the terms of use.