Max pain is the strike price at which option buyers, as a group, would lose the most money if the market expired there. Put the other way, it is the expiry level where option writers would pay out the least.

Many dashboards show a max pain number for NIFTY every day. Here is how it is worked out and how traders use it.

How max pain is calculated

Because it depends on open interest, max pain moves during the day and across the week as positions change.

  • Take every strike as a possible expiry price.
  • For each one, add up what all open calls and puts would be worth at expiry, using their open interest.
  • The strike where that total payout is the smallest is the max pain strike.

How traders use it

Some traders watch max pain in the last day or two before expiry, on the idea that large option writers prefer the index to settle near it. Others simply use it as a reference point to see where the heaviest OI is concentrated.

Why it is not a price target

  • Markets often expire far from max pain, especially on trending or news-driven days.
  • Early in the week it is mostly noise; OI is still building.
  • It treats all OI the same and ignores hedged positions.
  • It is best used with the option chain, PCR and price action, not alone.