The Trade & Probability Calculator tab is next to the Market Depth and Option Chains tabs in the All in One trade tool.The Trade & Probability Calculator shows a visual representation of the risk/reward of an options strategy to help you quickly assess option trade risk, based on the price of the underlying on certain dates, using the Black-Scholes option pricing model. It also plots the probability of the underlying symbol price at any point in time up to the expiration date.
The Trade & Probability Calculator tab is next to the Market Depth and Option Chains tabs in the All in One trade tool.
For more information on the Trade and Probability Calculator, visit the Quick Reference Guide.
Three lines overlay the graph:
These dates, along with the expiration date that used for the underlying probability chart, may be changed by clicking the calendar icon in the fields above the chart.
TIP: The Profit value on the Y axis only relates to the P&L lines, not to the underlying probability chart.
Customize colors: Right-click on the color square for each graph element (shown below) to change the color of the element or to hide the element. You can also click the element name to toggle between viewing and hiding the element.
The solid curve plots the underlying symbol's price probability at the expiration date for the option strategy selected using a log normal distribution based on the expiration date (or another date of your choosing), current trade price, and implied volatility %. Each point along the curve has an associated price (which you can see along the X axis) and probability of expiring at that price.
expansion arrows to view) includes the estimated 30 day at the money Implied Volatility, Dividend Yield, and Interest Rate percentage (Risk Free Interest Rate derived from $IRX). These values, along with the Upper and Lower Targets mentioned above, are adjustable allowing for multiple configurations or "what if" scenarios. You can also more precisely adjust the slider values by manually entering a number in the settings.View the probability for any price point by clicking on the graph. Crosshairs will display, pinpointing the price on the vertical crosshair and estimated profit or loss on the horizontal crosshair. The blue bar at the top of the tab will change to show the probability of the underlying price Touching or Expiring at that price point.
The Trade and Probability Calculator provides calculations that are hypothetical in nature based on various inputs including Implied Volatility, Dividend Yield, Interest Rate, user-defined price ranges and time. The calculations do not reflect actual investment results nor do they guarantee future results. The calculations do not consider any commissions or other costs, nor other positions in your account(s) for which a specific trading scenario is being examined. Rather, these calculations are based solely on selected contract(s) and/or equity in the specific trade strategy.
Although, the calculations incorporate annualized dividend yields, they do not consider ex-dividend dates, early assignment, and other risks associated with option trading. If an option expires before the estimated date, it is treated as though it expires on the estimated date. Investment decisions should not be made based solely upon values generated by the Trade & Probability Calculator. (0419-98L5)