Options positioning

How the calculation works

For a selected expiration, call payout at settlement price S is max(S − strike, 0) × open interest × contract multiplier, and put payout is max(strike − S, 0) × open interest × contract multiplier. We sum both across every listed strike for each candidate settlement price, then select the price with the lowest total payout as the modeled max pain.

Worked example

Two strikes, one expiration. Strike $100 has 10 call contracts and 5 put contracts of open interest; strike $105 has 4 call contracts and 12 put contracts; the contract multiplier is 100.

1. At a settlement price of $100: calls pay $0 (both strikes are at or above $100), puts pay max($105 − $100, 0) × 12 × 100 = $6,000 from the $105 strike. Total = $6,000.
2. At a settlement price of $105: calls pay max($105 − $100, 0) × 10 × 100 = $5,000 from the $100 strike, puts pay $0. Total = $5,000.

The $105 settlement produces the lower total payout, so it is the modeled max pain for this two-strike example.

Assumptions

• Only listed open interest and the contract multiplier enter the calculation; premiums paid, trading costs, and hedging activity are not included.
• When listed strikes tie for the lowest payout, the strike nearest the supplied snapshot price is selected, then the lower strike.

When to use this

Use the workspace to inspect how open interest is distributed around a ticker’s max-pain strike for a single expiration, alongside put/call ratios and the full payout curve, before reading it as one part of a broader picture.

Common mistakes

• Mixing open interest from more than one expiration into a single max-pain calculation.
• Treating the modeled max-pain strike as a price target or trading signal rather than a hypothetical payout-minimizing point.