Max Pain and the Put-Call Ratio

Max Pain: where would option buyers be hurt most?

Here's the theory. At expiry, option sellers (writers) pay buyers whatever the ITM options are worth. Writers are often large, well-funded players. So — the theory goes — the market tends to drift towards the expiry price where writers pay out the least. That price is called max pain.

Calculating it, step by step

Take a toy chain with five strikes and the number of open contracts (in lakh units):

For each possible expiry price, add up what writers would have to pay. If NIFTY expires at 22,400:

• Calls at 22,200 pay 200 points × 10 = 2,000; calls at 22,300 pay 100 × 20 = 2,000 → 4,000
• Puts at 22,500 pay 100 × 15 = 1,500; puts at 22,600 pay 200 × 10 = 2,000 → 3,500
• Total: 7,500 (lakh rupees) = ₹75 crore

Do this for every strike:

Max pain is 22,400: the expiry price that hurts option buyers the most (and writers the least).

The Put-Call Ratio (PCR)

PCR = total put activity ÷ total call activity

It's usually calculated on open interest; this site calculates it on volume (see below). In our toy chain: puts 175 ÷ calls 180 ≈ 0.97.

How traders read it — often as a contrarian signal:

On optionchain.in

Our data feed doesn't include open interest, so the PCR here is calculated on volume — total put volume ÷ total call volume for the expiry. Volume shows where trading activity is happening today, which reacts faster than OI but is also noisier. The Option Chain footer shows PCR (Volume), Max Pain and ATM IV, and the Volume and Volume Change pages show where activity is building strike by strike.