How to calculate probabilities?

As a rough estimate: 2 * N(d2)

Even rougher: 2 * delta

 

Thanks for all the replys

 

Hi Kevin

What if the delta is about 52% ?

 

Hi MGJ,

Don't forget that Black and Scholes model is priced under risk neutral probability. That means you expect the asset drift be the risk free rate.

 

Quick and dirty as it gets:
Look for best leverage. Multiply stock price by Option Delta, then divide by option price. Or Divide stock price by option strike price. Look for >10:1 leverage.

 

For deltas over 50 use 1 minus delta.

So 2 * 48 = 96% chance iof touch, very approximately.

 

This way a delta aroud 96% (deep in the money option), then it's 100%-96%=4%
So 2*4%=8% chance of touch

I agree it's very approximately

 

Thanks for that link...I've set this up and I am going to make so much fucking money with this calculation that I'm about to crap my pants...

 

Use the support and resistance price as base, and check the momentum, direction and strength of the trend on the underlying stock.

The chances of the price oscillating within the supp. and resistance is greater if the momentum and strength are not abnormal.

 

May I ask why you multiply by 1.5?

Futures Mag option article always uses the straddle price premium alone for closing price zone. I have not tested it.