There is a formula to calculate the Option Pain. For US markets there are sites like OptionPain.com to calculate the MAX pain. For the Indian markets Yesterday I posted a link.
http://www.traderscockpit.com/?pageView=futures-and-options-chain-analysis
In that please look at the Bar chart given at the bottom.
Whichever bar has the lowest value (Total PE+CE) has the Maximum pain, which is at 5975. So you can expect this market to expire around 5975.
So if you have taken Naked calls above 5975, then better to close it now.
There are also Excel spreadsheets available. You can google to find out.
MAX Pain is another indicator for Option Trading. Like any other indicator this is not 100%. The MAX Pain could shift to 6100 also. But right now it is at 6000. So it should be used only as a Caution. It applies more during the expiry because when we have just 5 days left we cannot expect any magic in the last 5 days because normally the Market makers come and eat the premium.
http://www.traderscockpit.com/?pageView=futures-and-options-chain-analysis
In that please look at the Bar chart given at the bottom.
Whichever bar has the lowest value (Total PE+CE) has the Maximum pain, which is at 5975. So you can expect this market to expire around 5975.
So if you have taken Naked calls above 5975, then better to close it now.
There are also Excel spreadsheets available. You can google to find out.
MAX Pain is another indicator for Option Trading. Like any other indicator this is not 100%. The MAX Pain could shift to 6100 also. But right now it is at 6000. So it should be used only as a Caution. It applies more during the expiry because when we have just 5 days left we cannot expect any magic in the last 5 days because normally the Market makers come and eat the premium.