Max pain theory

Sun, 21 Jun 2026 00:00:00 +0000

Max pain theory holds that the price of an underlying tends to gravitate, at options expiry, toward the strike at which the total payout to all option buyers, calls and puts together, is the smallest. That strike is the max-pain strike. Stated from the other side, it is the price at which option writers, mostly dealers and market makers, retain the maximum premium, because the largest number of contracts across both calls and puts expire worthless there. The level is computed from the open interest reported on the National Stock Exchange option chain.

Pin Risk on WebNotes

Max pain theory