The point at which options expire worthless. The term, max pain, stems from the Maximum Pain theory, which states that most traders who buy and hold options contracts until expiration will lose money.

According to the theory, this is due to the tendency for the price of a underlying stock to gravitate towards its "maximum pain strike price" - the price where the greatest number of options in dollar value will expire worthless. Max pain is the point where option owners feel "maximum pain," or will stand to lose the most money.

Options sellers, on the other hand, may stand to reap the most reward.

The Maximum Pain theory is controversial, and there is disagreement regarding if the tendency for the underlying stock's stock pinning option expiration to gravitate to the maximum pain strike price is by chance, or by some sort of market manipulation. Dictionary Term Of The Day.

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