6. Options and the volatility desk

Open interest and max pain (OPX)

OPX shows open interest (contracts still open) by strike and expiry, with the put/call ratio and max pain, the expiry price at which option holders would collect least.

  • 4 min
  • 3 questions
  • Lesson 1 of 3

Why you would care

Big piles of open contracts at one strike can act like magnets or walls near expiry, because the traders on the other side hedge around them. People talk about "max pain" and "pinning" every options Friday. OPX shows the piles. This lesson also shows why max pain is a curiosity, not a forecast.

The idea from scratch

Volume vs open interest

  • Volume

    contracts traded today. A trade can open a new position or close an old one.

  • Open interest (OI)

    contracts still open. It rises when a new buyer and a new seller create a contract, and falls when one is closed. It is counted once per day, after the session, by the clearing house.

Max pain

For one expiry, imagine every possible closing price. At each price, add up what all in-the-money calls and puts would pay their holders. The price where that total payout is smallest is max pain: the outcome that would hurt option buyers the most.

Some traders believe prices drift toward max pain at expiry ("pinning"). The evidence is weak; at best it matters for very large open interest close to expiry.

Put/call ratio

P/C OI = put open interest / call open interest. Above 1: more puts open than calls, often hedging, not necessarily bearish.

Diagram: Trades during the day leads to Clearing house counts open contracts overnight; Clearing house counts open contracts overnight leads to Open interest by strike and expiry; Open interest by strike and expiry leads to Max pain: price with the smallest total payout; Open interest by strike and expiry leads to Put/call ratio; Open interest by strike and expiry leads to Dealer gamma, next lesson.
Wide diagram: scroll sideways to see all of it.

See it in Gloom

Gloom screenshot: OPX SPY, Strikes tab for the Oct 1 '26 expiry
OPX SPY, Strikes tab for the Oct 1 '26 expiry: calls (green, up) and puts (red, down) by strike, with max pain and spot marked, and the payout table. Historical example.

open ittype OPX SPY (or MAXPAIN SPY). Tabs: Strikes (one expiry), Expiries (all of them), GEX (next lesson). [ / ] change expiry.

  1. Max pain 765 -0.1% vs spot, Spot 765.54: the price was almost exactly at max pain on expiry day.
  2. Call OI 97k, Put OI 105.2k, P/C OI 1.09: slightly more puts open than calls.
  3. The bars: the tallest green bar is far above spot (around 782): a pile of calls; red bars cluster below spot.
  4. Table PAYOUT $: total payout to holders if SPY closed at each strike. Lowest at 765 (35.31M): that is max pain.
  5. Row 766 2,899 1,063: call and put open interest at the strike nearest spot.

Practice and recap

Try it3 tasks
  1. In the table, how much would holders collect if SPY closed at 755? (54.25 million dollars.)
  2. Why does payout grow as you move away from max pain in either direction? (Further away, more calls or more puts end in the money.)
  3. OI at a strike rose by 5,000 overnight while volume was 6,000. Opened or closed? (Mostly opened: OI grew.)
Common mistakes4 mistakes
  • Reading open interest as today's trading. It is yesterday's count.
  • Treating max pain as a price target.
  • Reading a high put/call ratio as bearish: puts are often hedges for stock holdings.
  • Ignoring the expiry: each expiry has its own open interest and max pain.
Check yourself3 questions
  1. What is open interest?
  2. Define max pain in one sentence.
  3. When is open interest updated?
Answers
  1. The number of option contracts still open.
  2. The expiry price at which the total payout to option holders would be smallest.
  3. Once a day, after the session, when the clearing house counts open positions.
Words in this lesson5 words
open interest (OI)
Contracts still open, counted overnight.
max pain
The expiry price that minimizes total payout to option holders.
pinning
A price sticking near a big strike at expiry.
put/call ratio (OI)
Put open interest divided by call open interest.
clearing house
The firm in the middle of every trade that counts open positions.

Educational material about reading market data, not investment advice.