Max pain is the strike at which the largest number of open option contracts would expire worthless, minimizing writer payout. Theory: writers, usually right near expiry, steer price toward max pain.
In practice Nifty hovers within half a percent of max pain in the final two days of weekly expiry more often than chance. As a feature, max_pain_distance equals the absolute spot minus max pain divided by spot. The filter: when distance is below 0.3 percent and days to expiry is below two, reduce size (pinning trap) — do not fight the magnet.
Q: What is max pain in options?
A: The strike where most open contracts expire worthless, minimizing writer losses.
Q: Does Nifty really pin to max pain?
A: Often within a small band near weekly expiry, but not always — treat it as a probability.
Q: How do I use max-pain-distance?
A: As a sizing filter: very close to max pain near expiry means reduce or skip, not fight it.
Q: Is max pain a buy/sell signal?
A: No — it is a context and sizing tool, best combined with OI and PCR.
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By Shakti Tiwari · Options AI research pillar. NISM XII certified. Educational only, not investment advice; verify before acting.