Max Pain in Nifty Options: The Full Per-Strike Calculation

What max pain actually means

Max pain is the expiry price at which the largest rupee value of options expires worthless, which is the same thing as the price where option buyers lose the most and option sellers (writers) pay out the least. Every option that finishes in the money costs its writer money equal to its intrinsic value, and that intrinsic value is paid by the writer to the buyer at settlement. Add up that payout across the whole chain at a given expiry price, and the price that produces the smallest total payout is the max pain point.

The logic behind the theory is that option writers are mostly well capitalised institutions and market makers, while a large share of buyers are retail traders holding out-of-the-money options that decay to zero. The theory says the market tends to drift toward the price that hurts writers the least by expiry. It is a behavioural and structural idea, not a law of physics, and it works better as a sanity check than as a trade trigger.

One important clarification: max pain is computed only from open interest, the number of contracts still open at a strike. It ignores who is long or short, ignores the premium already paid, and ignores volatility. It is a snapshot of where the most option value sits, nothing more. As open interest changes through the week, the max pain level moves too.

The exact formula you can reproduce

For any candidate expiry price S, you compute the total writer payout in two parts. For every call strike K that is below S, the call is in the money by (S minus K) points, and the rupee payout is (S minus K) multiplied by the call open interest at K multiplied by the lot size. For every put strike K that is above S, the put is in the money by (K minus S) points, and the payout is (K minus S) multiplied by the put open interest at K multiplied by the lot size.

• Call payout at expiry price S = sum over all strikes K below S of (S minus K) times Call OI at K times lot size.
• Put payout at expiry price S = sum over all strikes K above S of (K minus S) times Put OI at K times lot size.
• Total payout at S = Call payout plus Put payout.
• Max pain = the strike S where Total payout is at its minimum.

Note that open interest is already reported in number of contracts on the NSE option chain, where one Nifty contract is one lot of 75. So you can either multiply by 75 to get rupees, or compare totals in raw points-times-OI units and pick the minimum. The winning strike is identical either way. Below we use a deliberately small, clean dataset so every number can be checked by hand.

Worked example: a real-style Nifty weekly expiry, full per-strike table

Assume Nifty is trading near 22,500 a couple of days before a Tuesday weekly expiry. We take six strikes spaced 100 points apart and the open interest in lots at each. These numbers are illustrative but built to look like a typical chain, with put OI heavy below spot and call OI heavy above spot. Lot size is 65.

Now we test each candidate expiry price. At expiry price 22,500, the in-the-money calls are the ones at strikes below 22,500 (22,300 and 22,400), and the in-the-money puts are the ones at strikes above 22,500 (22,600, 22,700, 22,800). We compute the payout in rupees using lot size 65. Here is the full call-side computation at expiry price 22,500.

For example the 22,300 call row is 200 points times 18,000 lots times 65 = Rs 23,40,00,000. Now the put side at the same expiry price 22,500, where puts above 22,500 are in the money.

Total writer payout at expiry price 22,500 is Rs 49.5 crore plus Rs 90 crore = Rs 139.5 crore. We then repeat this entire two-sided calculation at every strike. The summary table below shows the total payout at each candidate expiry price, which is the heart of the max pain calculation and the part most articles skip.

The minimum total payout, Rs 139.5 crore, occurs at 22,500. That strike is therefore the max pain for this chain. Read down the final column: payout is high at the extremes and dips to its lowest at 22,500, which sits right where heavy call OI above and heavy put OI below cancel out. This is the reproducible answer the previous version of this page only asserted without showing the working.

How to verify the call and put payout at 22,600

To prove the method, here is the full computation at expiry price 22,600, where three call strikes (22,300, 22,400, 22,500) are in the money and two put strikes (22,700, 22,800) are in the money. Calls in the money: 22,300 is 300 points in, 22,400 is 200 points in, 22,500 is 100 points in.

• 22,300 call: 300 times 18,000 times 75 = Rs 40,50,00,000.
• 22,400 call: 200 times 30,000 times 75 = Rs 45,00,00,000.
• 22,500 call: 100 times 85,000 times 75 = Rs 63,75,00,000.
• Total call payout at 22,600 = Rs 1,49,25,00,000, that is Rs 149.25 crore.
• 22,700 put: 100 times 22,000 times 75 = Rs 16,50,00,000.
• 22,800 put: 200 times 12,000 times 75 = Rs 18,00,00,000.
• Total put payout at 22,600 = Rs 34,50,00,000, that is Rs 34.5 crore.

Total at 22,600 is Rs 149.25 crore plus Rs 34.5 crore = Rs 183.75 crore, which matches the summary table exactly. The point stands: 22,600 costs writers more than 22,500, so 22,500 remains max pain. Anyone with the option chain and a spreadsheet can rebuild this column strike by strike.

Lot sizes and why they do not change the winning strike

The lot size converts index points into rupees, but because the same lot size multiplies every strike, it does not change which strike has the minimum payout. You could drop the 75 entirely, compare totals in points-times-OI units, and still get 22,500. Lot size only matters when you want the answer in actual rupees, for example to compare the scale of writer exposure across instruments.

Always confirm the current lot size and the exact expiry schedule on the NSE or BSE contract specification page before trading, because the exchanges revise both periodically and SEBI has changed the number of weekly expiries available. A wrong lot size will not change your max pain strike, but it will badly mislead any rupee exposure or position sizing you do off the same chain.

What max pain does not tell you

Max pain is a single number squeezed out of the whole option chain, so it throws away a lot of information. It does not tell you the direction of the next move, only a gravitational centre. It does not account for fresh open interest that pours in on expiry day, which can shift the level by hundreds of points within hours. And it says nothing about implied volatility, where the genuine risk on expiry day usually lives.

• It is a lagging snapshot. By the time you read it, large players may already be repositioning.
• It assumes writers can and will steer price. In a liquid index they have limited ability to do so against a strong trend or news.
• It ignores the cost side completely. Two chains with identical max pain can have wildly different risk for a seller.
• On event days, a budget, an RBI policy or a US Fed decision overwhelms it entirely.

A realistic options trade built around the level, with costs

Suppose you read the chain above, conclude Nifty is likely to stay pinned near 22,500 into Tuesday expiry, and decide to sell the 22,500 straddle: sell one lot of the 22,500 call and one lot of the 22,500 put. Assume the call premium is Rs 90 and the put premium is Rs 95, so you collect 185 points. With lot size 65, gross premium received is 185 times 75 = Rs 13,875 for the pair. These premiums are illustrative, not a quote.

If Nifty expires exactly at 22,500, both options expire worthless and you keep the full premium minus costs. Your costs as a seller include STT on the sold premium at 0.1 percent, brokerage (a discount broker is often a flat Rs 20 per executed order, so roughly Rs 40 for two legs), plus exchange transaction charges, SEBI turnover fee and 18 percent GST on brokerage and transaction charges. STT on the sold premium of Rs 13,875 is about Rs 14. Rounding the small statutory charges together, total costs here are on the order of Rs 70 to Rs 90, leaving a net credit near Rs 13,790.

• Premium collected: 185 points times 75 = Rs 13,875 (illustrative).
• STT on sold options: 0.1 percent of Rs 13,875 = about Rs 14.
• Brokerage: about Rs 40 for two legs on a flat-fee discount broker.
• Other statutory charges (exchange, SEBI, stamp duty, GST): roughly Rs 15 to Rs 35 combined.
• Net credit if Nifty pins at 22,500: roughly Rs 13,790, before tax on the profit.

The risk is the catch. A short straddle has unlimited loss. If Nifty closes at 22,700, your sold 22,500 call is 200 points in the money. STT on an exercised in-the-money option is charged at 0.125 percent on the intrinsic value, not on premium, which is a common and expensive surprise for sellers who let positions expire in the money. The 200-point loss on the call alone is 200 times 75 = Rs 15,000, wiping out the entire premium and turning the trade into a net loss even though max pain pointed at 22,500. This is exactly why max pain is a hint, not a guarantee, and why you size such trades small and keep a stop.

How F&O profit is taxed in India

This is where Indian traders most often get it wrong. Profit or loss from futures and options is treated as non-speculative business income, not as capital gains. So the 20 percent short-term capital gains rate and the 12.5 percent long-term rate above Rs 1.25 lakh that apply to delivery equity do not apply to your F&O straddle profit. Instead, the net F&O profit is added to your other income and taxed at your applicable income tax slab.

• F&O gains: taxed as business income at your slab rate, after deducting expenses like brokerage, data and even part of your internet or advisory costs.
• Delivery equity held 12 months or less: short-term capital gains at 20 percent.
• Delivery equity held over 12 months: long-term capital gains at 12.5 percent on gains above Rs 1.25 lakh in the year.
• F&O losses can be set off and carried forward, and a tax audit may apply depending on turnover, so keep clean records.

Because F&O is business income, costs are deductible against it, which softens the blow of brokerage and STT. But the slab treatment also means a profitable year can push you into a higher bracket. None of this is tax advice; confirm your exact position with a qualified chartered accountant, especially around turnover thresholds and audit requirements that the Income Tax Department updates.

Tracking max pain through the expiry week

Max pain is most useful when you watch how it moves, not just where it sits. Early in the week, open interest is thin and the level is unstable. As Thursday approaches, OI builds and the number usually settles. If max pain keeps drifting toward the spot price, the market is gravitating as the theory expects. If spot pulls hard away from a stubborn max pain level, a strong trend or news flow is overpowering the pinning effect, and that divergence is itself a useful signal.

You can pull the raw inputs free from the official NSE option chain, then compute max pain in a spreadsheet using the exact formula above, or use a broker tool that does it for you. Whatever the source, rebuild the table at least once yourself so you trust the number and understand which strikes are driving it. The discipline of reproducing the calculation is what separates traders who use max pain sensibly from those who quote a level they cannot defend.

Frequently asked questions

Sources and Further Reading

For authoritative data and further reading on this topic, refer to NSE Option Chain, NSE India and Zerodha Varsity. Always confirm current rules, rates and contract specifications on the official source before you trade.