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:…

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…

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…

Use filters to see strategies with specific features. You can filter options strategies by: 

Debit Only: Only shows strategies where the premium price is a debit, meaning the user will pay cash when the order executes…

The profitability of an option strategy is simply the return the investor receives from executing or closing the strategy, minus the options premium price paid or received when the position was opened, plus any fees or commissions paid¹. The value of an option depends on multiple factors including the current market price of the underlying security, strike prices of the options, distance between the strike price and the current underlying market price of the underlying, expected dividends, time until the options expire, and the Implied Volatility, which is the standard estimate of the future volatility of the underlying security’s price over the life of the option…

User-defined Probability of Profit reflects the user’s expectations of the future price of the underlying at expiration, and how volatile the underlying will be up until expiration. The Options Wizard allows the user to enter data reflecting her outlook on the future price, volatility, and also the time horizon of the underlying security…

Market-implied Probability of Profit reflects the market’s expectations of the future price of the underlying at expiration, and how volatile the underlying will be up until expiration. The accepted standard model of underlying price used in options pricing theory - like the Black-Scholes model - is the log-normal…

Distribution graphs reflect the probability of an event occurring.¹ This is depicted in the sample graph as the green curve, whose height at any given underlying price is proportional to the probability that the underlying price ends up within a narrow range of that price at expiration.  The accepted standard model of underlying price used in options pricing theory—like the Black-Scholes model—is the log-normal distribution…

The “Synthetic Price” calculation uses an algorithm that incorporates market data and option details to estimate implied volatility and generate a theoretical option price. Inputs to the algorithm include but are not limited to the underlying asset price, interest rates, dividends estimates, option right, strike price, time to expiration, and volatility estimate. The synthetic price is updated continuously as market conditions change…