- Decisions, Decisions: Understanding Option Probabilities
- Option Probability Curve | Option Alpha
- Options profit calculator
Are most options traders aware of five different types of volatility? Probably not. Most only deal with two types, historical and implied. All five types deserve some explanation and study.
Decisions, Decisions: Understanding Option Probabilities
On Sky View Trading recommend we use 85% Prob ITM that equal to 65% Prob of Touch, right? That gives good Credit but may need adjustment if the price against us. So I get confused which one to choose 85% or 97% Prob ITM? As 89% POP sounds good to trade. Thanks
Option Probability Curve | Option Alpha
Calculate stock market probabilities with this easy to use program. Get more results using Monte Carlo simulation with McMillan's Probability Calculator Software . Inputs Enter the following values:
Options profit calculator
This means that the probability that XYZ 8767 s price will expire at least one penny below $776 is about 65%. If XYZ 8767 s price is at $, the call spread won 8767 t reach max profit.
You can see how you can visually just project that on the chart and we get almost the same identical look in our charts that we have here in the slide that we did where it’s just something I threw together just to get your minds thinking about these probability graphs on the actual stock chart.
A good alternative to the probability of ITM is the option Greek Delta. These two usually are almost the same (Delta normally is slightly greater). On the right-hand side, you can see a table in which the probability of ITM and Delta are compared for different options. As you can see, Delta is always slightly greater. Nevertheless, it can be used as an alternative for the probability of ITM.
Comparing an option’s delta (or other probability calculation) against the price at which you could buy or sell an option can help you determine your strategy for entering and exiting option trades. And with that decision out of the way, you can move on to other important matters, such as whether to have the salad or the pizza for lunch. For that decision, though, you’re on your own.
There is a 68% chance that from Apple today, from where it’s trading today at 699, that Apple trades within this range between now and June expiration and that range are 595 on the lower side, so 595 down here and 668 on the upper side. Again, a 68% chance or more or less a 75% chance that Apple trades between 668 and 595 between now and June expiration.
So actually, the probability of that happening is greater than the probability of it not happening. Your short put position will show a paper loss when this happens.