Max Pain
The strike at which the total value of expiring options is smallest — where option buyers collectively lose the most.
Also called: maximum pain · max pain theory · max pain strike
What it means
Max pain is computed, not observed. For each candidate strike you total what every outstanding call and put would be worth if the underlying expired exactly there, and the strike producing the lowest total is the max pain point.
The theory attached to it says price tends to drift toward that strike by expiry. The evidence for that claim is weak and the mechanism is contested; the calculation is arithmetic, the prediction is a hypothesis.
It is most often used as one reference level among several — a place where a lot of open interest is clustered — rather than as a forecast.
How OptionLab Pro’s engine uses it
In the live engine
Per-strike pain is the sum of max(0, K−S) weighted by call open interest plus the sum of max(0, S−K) weighted by put open interest, and max pain is the argmin over K. It is surfaced as a chart strip beside Put-Call Ratio, as a context level. It is deliberately not an engine input and does not vote on any signal.
go/internal/optionchain/maxpain.go (ComputeMaxPainAndPCR)The common mistake
Where traders get this wrong
Treating max pain as a price target. It is recomputed every time open interest changes, so it moves — and a level that moves with the data it is derived from cannot be a forecast of that data. Positioning for an expiry pin on this basis alone is a bet on a contested theory.
Related terms
Educational and analytical content only. OptionLab Pro is not a SEBI-registered investment adviser or research analyst and does not give buy or sell recommendations. Derivatives trading carries a high risk of loss.