What is the Max Pain Price?

In options trading, max pain is the strike price at which the underlying asset price would cause most financial losses for the largest number of option holders at expiration.

The Maximum Pain theory states that an option's price will gravitate towards a max pain price that causes the maximum number of options to expire worthless. In some cases, the max pain price equals the option strike price.

How to calculate the Max Pain Price?

You can calculate the max pain price by scanning all Calls and Puts and cross-referencing them against each possible strike price at expiration.

First, calculate the cumulative intrinsic value for both call and put contracts when the index price is at each strike price at expiration, where the intrinsic value measures the worth of the Call or Put Options as below:

Call Intrinsic Value = (Index Price - Strike Price) * Open Interest

Put Intrinsic Value = (Strike Price - Index Price) * Open Interest

As the asset index price at expiration drops, the cumulative intrinsic value of in-the-money Puts at each strike would increase. At the same time, as the asset index price at expiration goes higher, it would increase the cumulative intrinsic value of in-the-money Calls at each strike.

The max pain will be where the sum of intrinsic value for Puts and Calls is the smallest.

How to visualize the Max Pain Price on Options data?

1. Log in to your Binance account and go to [Information] - [Options Data].

Alternatively, you can visit the Options Data page.

2. Select the symbol and expiry date to visualize the max pain price.

Please note that the max pain price displayed is for reference only and should not be considered as financial or trading advice.