What is the Performance Profile tool?

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…

In either Classic TWS or Mosaic, right click on an option or option combo and select Analytical Tools followed by Performance Profile.

A window will populate and will show Quote Details, Profit Probability, Max Loss and Max Return. There is also a Performance Graph section and a Scenarios section which displays a projected max profit/loss after a specified move in the price of the underlying…

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…