Max pain, and how often it holds

For one expiry, imagine the price settles exactly on each listed strike in turn. At each, add up what all the open calls and puts would pay out. The strike where that total is smallest is the max pain: the settlement that costs option holders the most and option sellers the least.

The idea behind it is that sellers have an interest in the price ending near that strike and some ability to nudge it there. Whether that is true is exactly the kind of claim worth measuring.

Knowla measures it. For every expiry that has settled, it takes the max pain as it was five days before expiry and compares it with the settlement price Deribit published. Reading it ahead of time is the point: a max pain read an hour before expiry would naturally sit near the price.

The typical miss is the median gap, as a percentage of the settlement. The page lists each expiry so you can see the spread, not only the average. The record fills in as expiries pass after collection began, and it cannot be backfilled, so a young record is short.

Treat max pain as a level the options book is sitting around, not as a target. If the measured miss is large for a coin, the level carries little. If it is small, it is worth noticing alongside the walls and the expected move.

It uses open interest from public books, which does not say who holds what or whether positions are hedged elsewhere. It is a calculation from listed numbers, nothing more.