How to Add Options Probabilities

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01/19/2022 at 9:37 PM #185980 quote

gabri
Participant

Master

Yes, I got that, but where are they coming from? Is the first time I see those formula. Is there some text you got the formula from? It is just to understand better

01/19/2022 at 9:40 PM #185982 quote

JS
Participant

Senior

Was the calculation tool of Bard, better ask him…

01/19/2022 at 9:48 PM #185985 quote

JS
Participant

Senior

In general the calculations come from the normal distribution…where the standard deviation is the difference between the current price and the target price.

NormalDist.png

01/19/2022 at 9:54 PM #185987 quote

gabri
Participant

Master

That is clear. I was just unsure if a standard bell curve was used or if the baseline was the real curve withe the calculated skewness of the underlying. Now is clear, thanks

01/19/2022 at 10:25 PM #185989 quote

JS
Participant

Senior

Do you want the calculation of the example?

01/19/2022 at 11:14 PM #185995 quote

JS
Participant

Senior

Volatility: 17%

Days to expiration: 21

Current price: 35805

With a volatility of 17% and after 21 days the price difference is: 35805 x 0,17 x SquareRoot(21 / 365) = 1460

Difference between current and (upper) target price: 37080 – 35805 = 1275

Difference between current and (lower) target price: 35805 – 34000 = 1805

1275 / 1460 = 0,87 cumulative distribution = 80%

1805 / 1460 = 1,24 cumulative distribution = 89%

img207.fig_.png

07/26/2024 at 7:12 AM #235799 quote

Nicolas
Keymaster

Master

Some of the calculation statistics discussed in this topic will be making their way into the all-new options module (still a work in progress) that will be embedded in version 13 of ProRealTime. Stay tuned for more updates! 😉

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