11.34What is max pain?
1What is it?
Max pain is the strike at which option buyers as a group would lose the most (sellers gain most) at expiry, calculated from OI.
2Why does it exist?
Some traders believe prices drift towards max pain near expiry. Evidence is weak; treat it as a curiosity, not a rule.
3Quick revision
- Strike where buyers lose most.
- Weak predictive evidence.
4Knowledge check
Q1. Max pain is pain for whom?Show answer
Option buyers.
Q2. What data is used to compute it?Show answer
Open interest at each strike.
Q3. Reliable predictor?Show answer
No.