What is max pain in crypto options?

Max pain is the price at which the most options would expire worthless. Here's what it means for Bitcoin and Ethereum, why some traders watch it, and why it's not a prediction.

Max pain is the price at which the largest number of options contracts would expire worthless on a given expiry date. In other words, it's the price that would cause the most "pain" to people who bought options, and the least to the people who sold them.

A quick primer on options

An option is a contract that gives you the right to buy (a "call") or sell (a "put") an asset at a set price on a set date. People pay a fee upfront for that right. If the price doesn't move the way they hoped by expiry, the option is worthless and the fee is lost.

Bitcoin and Ethereum have large options markets, the biggest on an exchange called Deribit. See crypto options expiry for when they expire.

How max pain is worked out

For every possible expiry price, you add up how much all the outstanding calls and puts would be worth. The price where that total is lowest is max pain.

Why traders watch it

Some traders believe prices tend to drift towards max pain as expiry gets closer, because the large players who sold options have a reason to hedge in ways that nudge prices there. The effect, when it shows up at all, is usually strongest in the last few days before a big expiry.

Why it's not a prediction

Max pain is a snapshot of open contracts, and those change every day. Big news, a market-wide selloff or a strong rally easily overpowers it. Treat it as one more piece of context: "if nothing else happens, this is the level some traders are watching into Friday."

How SteelWater shows it

Our free daily read includes the current max pain level for upcoming Bitcoin and Ethereum expiries, explained in plain English, alongside the news that's more likely to drive prices.

General market information for education only, not financial advice. Crypto-assets are highly volatile; never risk money you can’t afford to lose.