Probability of Profit¹ is a common industry expression used to describe the likelihood that a single or multi-legged option strategy will make at least $0.01 profit on a trade. If the multi-legged strategy includes options with different expiration dates, the probability of profit calculation extends to the date of the leg with the earliest expiration date. The calculation of POP is based on widely accepted option theory using either market-implied or user-defined data…

An options performance graph plots the profit and loss of an options strategy across the possible range of prices of the underlying security. The graph is centered at the current options strike price. The option premium is cash either paid or received for opening the options strategy position. The breakeven point is when the value of the option is equal to the premium paid (not including any applicable fees or commissions). The breakeven is calculated as:…

Long Call

An investor might use a long call option position when the share price or market is expected to rise…

Probability of Profit combines your option strategy’s performance graph (which plots the price of the options as determined by standard pricing models such as Black-Scholes across the various underlying securities prices) with the market-implied price distribution graph…

When you elect to exercise, the request can be cancelled up until the time of exercise which generally occurs by the morning of the next business day but may occur sooner. If desired, you can specify that an option exercise request be immediately final (non-editable and cannot be canceled) by checking…

Introduction

Exercising an equity call option prior to expiration ordinarily provides no economic benefit as:…

MANAGE TRADING PERMISSIONS    SUBSCRIBE TO MARKET DATA

Trade stocks, options, futures, currencies, bonds, ETFs and more from a single IBKR Integrated Investment Account. Clients from most countries are allowed to trade…

What is a protective collar and how does it work?

A protective collar is an options strategy that creates defined boundaries on both potential gains and losses for a stock position. It involves three components:…

In the TWS OptionTrader or TWS/Mosaic Option Chains window, click on the drop down menu that says SPX in the upper right corner of the option chains. Select SPXW as the Trading Class and the screen will change to the SPXW Weekly options. The rest of the available weekly expiries can be found by clicking on the…

Long Put

An investor might use a long put option position when the share price or market is expected to decline…

Short Straddle

When neutral on the outlook for a stock, an investor might wish to generate income by selling same strike call and put options hoping that the stock will remain stuck in a defined range…

Introduction

A warrant confers the right to buy (call-warrant) or sell (put-warrant) a specific quantity of a specific underlying instrument at a specific price over a specific period of time…

You can choose to sort strategies based on aggressiveness, from low to high or high to low. The low, medium, and high aggressiveness rating of a strategy provides a quick way to assess how likely the strategy is to realize a profit. Each version of a particular strategy (for example, one version of a long call might be a long call with a strike…

Any option position other than one outlined below is considered uncovered:

• Long call or long put;
• Covered call;…

Overview:

Account holders have the ability to exercise equity options they hold long in their account…