How max pain is calculated
Take one expiration. For every strike that could be the closing price, add up what all the open calls and puts would be worth if the stock closed exactly there: each call is worth the close minus its strike (if positive), each put is worth its strike minus the close (if positive), times its open interest, times 100 shares. The strike where that total is smallest is max pain.
A small example with three strikes:
| Strike | Call open interest | Put open interest |
|---|---|---|
| 95 | 100 | 800 |
| 100 | 500 | 600 |
| 105 | 900 | 100 |
- Close at 95: no call is worth anything; the 100 puts are worth 5 × 600 and the 105 puts 10 × 100 → 4,000 (× 100 shares = $400,000).
- Close at 100: the 95 calls are worth 5 × 100, the 105 puts 5 × 100 → 1,000 ($100,000).
- Close at 105: the 95 calls are worth 10 × 100, the 100 calls 5 × 500 → 3,500 ($350,000).
The total is lowest at 100, so max pain is 100. Real chains have dozens of strikes, but the sum is the same.
Why the price sometimes drifts toward it
The usual story is hedging: market makers who sold the options hedge them with the stock, and as expiry nears that hedging can lean the price toward the strikes with the most open interest — a “pin”. Studies find the effect is weak and shows up mostly in the last days before expiry, more in smaller, less traded stocks than in giant index funds. Plenty of expirations finish far from max pain, especially when news moves the market.
Which expiration?
Every expiration has its own max pain. SPY and QQQ have an expiration every weekday, so “SPY max pain today” depends on which one you mean: the next one, Friday’s weekly, or the monthly (the third Friday). A figure that mixes all expirations is a different number again. On this site each ticker page lists max pain by expiration.
How to use it
- Treat it as context for the last few days before an expiration, not as a target weeks away.
- Read it with dealer gamma: a pin is more plausible when dealers are long gamma (their hedging calms the price) than when they are short gamma.
- Read it with the call wall and put wall: when max pain sits between them, the picture is consistent; when the price is far outside, max pain usually matters little.