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The strike price where the most option contracts would expire worthless, causing maximum loss to option buyers. Stocks sometimes gravitate toward max pain near expiration due to dealer hedging flows.
⚡ KEY TAKEAWAY: Not a prediction, but a magnet. Stocks drift toward max pain more often than random — factor it in when choosing expiration timing.
Term Structure
Contango = normal, good for sellers. Backwardation = market stress, reduce position size or wait.
Contango
Normal state = green light for sellers. VIX/VIX3M below 0.9 means term structure strongly supports premium selling.
Backwardation
Market is pricing more fear now than later. Reduce size, tighten stops, or sit out until contango returns.
VIX (Volatility Index)
VIX 15–25 is the sweet spot for premium sellers — enough fear for rich premiums, not enough for gap risk.