Calculating Options Max Pain from Open Interest by Strike

Summary

This overview describes a tool that retrieves options open interest through an exchange API and calculates max pain for a selected expiry. Max pain is defined as the underlying price at which the total intrinsic value of currently held calls and puts would be lowest. A chart presents open interest by option type alongside intrinsic value by strike, marking the strike with the minimum total value. Users can select an expiry and switch among supported currencies, with available expiry choices adjusted to each currency’s listed contracts.

The article explains the concept and the tool’s display, but supplies no evidence that max pain predicts settlement prices or offers a profitable signal. The calculation is a snapshot based on current open interest and intrinsic value; it does not account for how positions or market conditions may change before expiry. The described program uses a graphical interface and plotting libraries, and the same open-interest data could also support other visualizations. No backtest or performance results are provided.

Key ideas

• Max pain is the underlying price that minimizes aggregate intrinsic value across current option positions.
• The calculation uses open interest by strike for calls and puts and evaluates total intrinsic value at candidate prices.
• The displayed minimum is tied to the selected expiry and the currently available option data.
• Max pain is a descriptive snapshot, and the document does not show that it forecasts expiry prices.
• Open interest by strike and option type can also be useful independently of the max pain calculation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.