9A.16 Case studies

9A.16.1The 27 October 2026 monthly expiry, and max pain on 31 expiries#

Context The October 2026 monthly Nifty expiry fell on Tuesday 27 Oct. The day before, the Nifty closed at 22,753.20 after a weekend rally (NSE F&O bhavcopy, 26 Oct 2026).

The chain on 26 Oct (27 Oct expiry, all 144 strikes):

• Total call OI 22.34 crore units, put OI 25.15 crore units: $\mathrm{PCR}_{OI}=1.126$; $\mathrm{PCR}_{vol}=1.034$.
• Largest call OI: 23,000 (1.76 crore units), 23,500 (1.65 crore), 23,100 (1.38 crore). Largest put OI: 22,500 (1.70 crore), 22,000 (1.55 crore), 21,500 (1.52 crore).
• Max pain 22,750: at 22,750 cumulative call OI below is 2.83 crore units against cumulative put OI at or above of 2.94 crore (left derivative negative), and cumulative call OI at or below is 3.23 crore against put OI above of 2.49 crore (right derivative positive), as Proposition 9A.3 requires. $W(22{,}750)=\text{₹}2{,}351.9$ crore.
• The ATM straddle (22,750) cost 188.5 points, an implied expected absolute move of 0.83% for one day.

Outcome The final settlement on 27 Oct was 22,749.75 (bhavcopy of 27 Oct, UndrlygPric and futures settlement): 0.25 points from max pain, and 3.45 points from the previous close. The OI wall readings (support 22,500, resistance 23,000) were also respected.

Why this does not establish anything Max pain was 3.2 points from the previous close. Any forecast equal to the previous close was equally good on this day. The question is whether max pain beats the previous close across expiries.

The test For each Nifty expiry from 7 Apr to 3 Nov 2026 (31 expiries: weekly and monthly, including the Monday expiries of 13 Apr and 19 Oct), compute from the previous trading day's bhavcopy the max pain $x^\ast$, the close $S_{T-1}$ and the ATM straddle, and compare with the expiry-day settlement $X_T$.

Statistic	Value
Mean $\lvert X_T-x^\ast\rvert$ (median)	154.1 (128.3) points
Mean $\lvert X_T-S_{T-1}\rvert$ (median)	149.6 (119.1) points
Expiries where max pain was closer	16 of 31 (binomial two-sided $p=1.00$)
Paired difference, mean (t-stat; Wilcoxon $p$)	+4.4 points ($t=0.37$; $p=0.99$)
Direction: sign($x^\ast-S_{T-1}$) = sign($X_T-S_{T-1}$)	16 of 31 ($p=1.00$)
Correlation of $x^\ast-S_{T-1}$ with $X_T-S_{T-1}$	−0.11
Settlement between the max-put-OI and max-call-OI strikes	19 of 31
Mean distance to nearest 100 (uniform: 25)	24.7 ($z=-0.11$)

Source: NSE F&O bhavcopies, 6 Apr–3 Nov 2026, downloaded 6 Nov 2026; settlement taken as the UndrlygPric of the expiring Nifty options on expiry day.

Analysis In this sample max pain is no better than the previous close as a forecast of settlement, carries no directional information, and the settlement shows no clustering at round strikes. With 31 observations a modest effect could exist undetected: to detect a 60% directional hit rate with 80% power at the 5% level needs about 194 expiries (Problem 9A.16). The 27 Oct case is an anecdote produced by the corollary of Proposition 9A.3: when the index has been sitting near a strike, the OI median is near it too.

9A.16.2RBI policy, 7 October 2026: implied versus realised#

Context The MPC raised the repo rate by 25 bp to 5.50% on 7 Oct 2026, unanimously, and changed the stance to "calibrated tightening" (RBI; M11 Case 3). The hike came during the 2026 oil shock and followed the Fed's September hike.

Data (NSE F&O bhavcopies, ATM Black-76 IVs from closing prices, parity forwards, calendar days; computed for this module):

Date	Nifty	13 Oct IV	19 Oct IV	27 Oct IV	13 Oct straddle
5 Oct (Mon)	22,555.75	14.46%	14.19%	14.04%	385.25
6 Oct (Tue)	22,776.10	12.15%	12.55%	12.55%	305.20
7 Oct (Wed, decision)	22,603.05	11.87%	12.35%	12.93%	274.30
8 Oct (Thu)	22,231.80	13.46%	14.08%	14.57%	279.50

Analysis Worked example 9A.5 did the extraction. The 5 Oct curve gives an event standard deviation of 0.64%, but it is contaminated by the post-shock inversion; the 6 Oct curve shows no premium at all. The realised move on decision day was $-0.76\%$. The 13 Oct IV dipped 0.28 points on the day, consistent with a small resolved uncertainty, then rose 1.6 points on 8 Oct as the index fell 1.64%. The market's volatility on these days was driven by the general environment (oil, rates, flows; M11), not by the decision itself.

9A.16.3Participant OI through two expiries#

Context The participant-wise OI files for 5–6 Oct and 26–27 Oct 2026 straddle a weekly and a monthly expiry (table in 9A.11).

Analysis Total index call OI fell from 60.7 lakh to 35.2 lakh contracts (−42%) across the 6 Oct weekly expiry, and from 63.8 lakh to 30.6 lakh (−52%) across the 27 Oct monthly expiry. Every category's index option longs and shorts fell together. A naive reading ("Clients cut index call longs by 53% on 27 Oct", from 41,49,354 to 19,58,249 contracts) describes the expiry, not a decision. Meanwhile FII index-futures long share moved from 8.1% (5 Oct) to 21.5% (5 Nov), a change that survives the expiry effect because it builds across several weeks and is in futures, whose monthly expiry affects both sides proportionally.