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Find Here the Options Strategy Docs & Payoff Guide
🎯 What each Option's metric means and how to interpret them
σ: annualized implied volatility
This is the annualized implied volatility for the underlying, converted into the expected standard deviation of returns over the time to expiration.
High σ (E.g. 80%) means the market expects large price swings before expiration.
EV: -(E[P&L])
Expected Value of Profit/Loss: the probability-weighted average payoff across all possible prices at expiration.
Example, -$15.5 means that, given the current volatility and pricing assumptions, the strategy is expected to lose $15.5 on average.
It’s not a guarantee—just a statistical expectation under the lognormal distribution.
ESPEx: E[Sₜ]
Expected Stock Price at expiration under risk-neutral assumptions.
This is the mean of the lognormal distribution, factoring in risk-free rate and time to expiry.
If E[Sₜ] is near current spot, it suggests no strong directional bias priced in.
±1σ: $X … $Y
The one-standard-deviation range for the underlying price at expiration.
About 68% probability the stock ends between $X and $Y.
Useful for seeing if your strikes are inside or outside this “likely” range.
Probability of Profit (%) Can be shown in the Advanced P&L Calculator
This estimates the chance that your strategy finishes above breakeven at expiration.
It integrates the payoff curve with the probability density (from IV).
For example, if PoP = 33%, you have roughly a 1-in-3 chance of ending profitable.
Important: It ignores early exits and time decay effects—it’s purely expiration-based.
How to interpret all together
High σ → wide price uncertainty → spreads may be cheaper but risk is higher.
Negative EV → statistically unfavorable trade (on average), but directional conviction can override this.
E[Sₜ] near spot → market expects little drift.
±1σ band → check if your strikes are inside this range; if both are outside, probability of profit is low.
PoP% → quick gauge of risk/reward vs. probability; combine with max profit/loss to judge if the trade fits your plan.
🔍 Probability (scaled) - What it Represents
The "Probability (scaled)" line shows a scaled probability distribution of the underlying asset's price at expiration. It’s based on the implied volatility (σ = 39.9%) and time to expiration (43 days), assuming a log-normal distribution of prices.
📈 How to Read It
The x-axis is the underlying price at expiration.
The right y-axis (0 to 1) is the scaled probability — not the actual probability, but a normalized version to fit the chart.
The peak of the gray curve shows the most likely price at expiration.
The width of the curve reflects volatility: a wider curve means more uncertainty.
🧠 Why It Matters
It helps you visualize the likelihood of different outcomes.
You can compare this with the P&L at expiration (blue line) to see how likely it is to hit profitable zones.
For example, if most of the probability mass is below the breakeven point ($), the trade has a low chance of profit, even if the max profit is high.
⚠️ Disclaimer
OraniaTech and this tool are intended for educational and informational purposes only.
Nothing provided here constitutes financial, investment, or trading advice. Options trading involves significant risk and is not suitable for all investors. You should carefully consider your financial situation and consult with a qualified financial advisor before making any investment decisions.
