The concept of 'Max Pain' and why this is probably the reason the 'Whales' decided to not push up the price on Friday after they met resistance. They wanted to inflict the maximum pain on shorts while spending the least amount of money. way to rub 🧂 in the wound! 💎✋🚀🚀🚀

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| Author       | Source       | 
| :-------------: |:-------------:|
|  [u/Cuttingwater_](https://www.reddit.com/user/Cuttingwater_/) | [Reddit](https://www.reddit.com/r/GME/comments/mejp0k/the_concept_of_max_pain_and_why_this_is_probably/) | 

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[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)

Hello my fellow Apes 🦍🦍🦍,

Today we are going to talk about a concept called Max Pain (no I am not talking about Max Payne, but he is pretty awesome too), and a theory for what happened with GME on Friday after we met resistance at $220.

[![r/GME - The concept of 'Max Pain' and why this is probably the reason the 'Whales' decided to not push up the price on Friday after they met resistance. They wanted to inflict the maximum pain on shorts while spending the least amount of money. way to rub 🧂 in the wound! 💎✋🚀🚀🚀](https://preview.redd.it/1b2oy76cwlp61.png?width=460&format=png&auto=webp&s=62e727374d8ce96cbf337948772b0de36d6ea43a)](https://preview.redd.it/1b2oy76cwlp61.png?width=460&format=png&auto=webp&s=62e727374d8ce96cbf337948772b0de36d6ea43a)

---------- BOILERPLATE:

I still know nothing, I can't do math good. PLEASE don't listen to me! Obligatory 🚀🚀🚀

TLDR: After the Whales met any resistance to their upward campaign, they decided to call it a day, hit the SSR and inflict the maximum pain on the shorts using the least amount of money. Any price above $160 would do this. It will be exciting to see what will happen on Monday! 💎✋🚀🚀🚀

---------- Max Pain

First off, how cool is it that there is an actual finance term called MAX PAIN?!?!

Here is the quick definition of Max Pain, if you want to read more, [here is the investopedia link](https://www.investopedia.com/terms/m/maxpain.asp):

> Max pain, or the max pain price, is the strike price with the most open contract puts and calls and the price at which the stock would cause financial losses for the largest number of option holders at expiration.

>

> 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

Manually calculating the max pain price is an arduous process (literally summing up the put and dollar value for each ITM strike price and then finding the one with the worst outcome), but luckily there are several websites that do it for you!

One of them is [maximum-pain.com](http://maximum-pain.com/options) and another is [Swaggystocks.com](https://swaggystocks.com/dashboard/options-max-pain/GME).

I prefer the look of [maximum-pain.com](https://maximum-pain.com/) however it seems you can not look at historicals and now they only have April 1st data. Luckily I still had a tab open with [Swaggystocks.com](https://swaggystocks.com/), so I will use graphs from them.

[![r/GME - The concept of 'Max Pain' and why this is probably the reason the 'Whales' decided to not push up the price on Friday after they met resistance. They wanted to inflict the maximum pain on shorts while spending the least amount of money. way to rub 🧂 in the wound! 💎✋🚀🚀🚀](https://preview.redd.it/derng9xmxlp61.png?width=1452&format=png&auto=webp&s=52ca2139f97dd8d718a0d88333ba621cce9dd618)](https://preview.redd.it/derng9xmxlp61.png?width=1452&format=png&auto=webp&s=52ca2139f97dd8d718a0d88333ba621cce9dd618)

What they give you is a pretty looking graph like this and essentially the spot where the two colours intersect (calls and puts) and has the lowest total value is the Max Pain. This means the least number of puts and calls will be ITM and will expire without being used.

The Max Pain price for March 26 was calculated to be $160.

Now from the Long Whale's prospective, I think it is really the Max Pain on just Puts that they really care about since I'm sure some of the calls were purchased by them. This means that any price ABOVE $160 would be the most painful for the shorts.

Lets look at the open interest at the different strike prices. the numbers represent the number of open options, not the value. Open Interest means that the option has not yet been used.

[![r/GME - The concept of 'Max Pain' and why this is probably the reason the 'Whales' decided to not push up the price on Friday after they met resistance. They wanted to inflict the maximum pain on shorts while spending the least amount of money. way to rub 🧂 in the wound! 💎✋🚀🚀🚀](https://preview.redd.it/rc8ohzw10mp61.png?width=1443&format=png&auto=webp&s=03788c088518575ea652c9d59fce1a684d77343b)](https://preview.redd.it/rc8ohzw10mp61.png?width=1443&format=png&auto=webp&s=03788c088518575ea652c9d59fce1a684d77343b)

You can see that there is a LOT of puts spiking right up to... $155.

This suggest that the Shorts really wanted to get the price down to that level so their puts could start getting ITM and then they could take advantage of those puts to continue to drive the price down.

---------- What happened Friday

[![r/GME - The concept of 'Max Pain' and why this is probably the reason the 'Whales' decided to not push up the price on Friday after they met resistance. They wanted to inflict the maximum pain on shorts while spending the least amount of money. way to rub 🧂 in the wound! 💎✋🚀🚀🚀](https://preview.redd.it/sms9i81w0mp61.png?width=2033&format=png&auto=webp&s=a93832c64367dd31f093d9612e41139346d67fcb)](https://preview.redd.it/sms9i81w0mp61.png?width=2033&format=png&auto=webp&s=a93832c64367dd31f093d9612e41139346d67fcb)

So here is what I think happened on Friday:

-   The Longs tried to continue their upward campaign right after the market opened. There was 2.7m in volume (7% of the whole day) on the green candles in only 15 minutes between 9:37-9:52.

-   However when they met heavy resistance at $220, they tried pushing through 1 or 2 more times then decided to change tactics.

-   The volume significantly decreased and very little was spent on green candles. They probably calculated that it wasn't worth pushing the price today and instead try to inflict the most damage to the shorts and spend the least amount of money doing it.

-   They then allowed the stock to slowly decline and when it was close to the SSR limit, I think it was actually the longs that pushed it down so quickly, hitting the SSR and then immediately bought back the stocks and continued pushing the price back up into the $183 - $175 resistance levels.

-   After it went into this band, they just chilled and spent as little money as possible to just keep the stock there.

-   At this level, nearly all puts were OTM just rubbing salt into the wounds of the shorts who spent tens or hundreds of millions this past week to only have the price $10 lower than Friday last week.

-   NOTE: The purple line in the graph is the VWAP (volume weighted average price), you can see that even with all the ups and downs, the VWAP hardly moved, only going from $201 at market open to $193 at market close, which is actually MUCH higher than the VWAP at Thursdays close ($158).

---------- TLDR:

After the Whales met any resistance to their upward campaign, they decided to call it a day, hit the SSR and inflict the maximum pain on the shorts using the least amount of money. Any price above $160 would do this. It will be exciting to see what will happen on Monday! 💎✋🚀🚀🚀

[![r/GME - The concept of 'Max Pain' and why this is probably the reason the 'Whales' decided to not push up the price on Friday after they met resistance. They wanted to inflict the maximum pain on shorts while spending the least amount of money. way to rub 🧂 in the wound! 💎✋🚀🚀🚀](https://preview.redd.it/fgw3sc2l7mp61.png?width=1191&format=png&auto=webp&s=77bdcfe883b6fc1d2dc545c24a7de4629042ec30)](https://preview.redd.it/fgw3sc2l7mp61.png?width=1191&format=png&auto=webp&s=77bdcfe883b6fc1d2dc545c24a7de4629042ec30)
