Probability of the gap filling to the downside today

Discussion in 'Trading' started by mgabriel01, Jan 14, 2008.

  1. IMHO 68%
  2. Pekelo


    I calculated 57.43%. but I am sleepy this morning...
  3. just check where a one-day touch option with strike equal to last friday's close trades. The price expressed as a % of a 100% equals the probability of filling this gap.

  4. Cool!
    (learn something new every day!)

  5. ummm...

    Whats a 1 day touch option?

  6. a one touch option will pay 100% of a specified notional if at any time during the day we hit 1405 on the cash.

    the price of such an option maybe quoted 57% - 62% meaning that you can buy this option for 62% of the specified notional or you can sell it for 57%.

    Let's say you believe we will fill the gap and are willing to bet around $6,000 (these options are also called American bets).

    You can go and pay $6,200 for this option. If we hit 1405, the option is extinguished and you earn $10,000 minus $6,200 so $3,800.

    It also means that the probability we will hit 1405 on the cash is around 60%.

    hope this helps

  7. Yes it does
    thanks for the insight!
  8. Div_Arb


    Thanks for the definition, Alexandre. Where do you find the quotes for one-touch options?

  9. thanks guys.

    I believe you can get quotes from and but you may need an account. I'm not affiliated or have an account with any of the above.

    good trading