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# Probability of the gap filling to the downside today

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

IMHO 68%

2. ### Pekelo

I calculated 57.43%. but I am sleepy this morning...

3. ### Alexandre

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. ### mgabriel01

Cool!
(learn something new every day!)

thanks

5. ### mgabriel01

ummm...

Whats a 1 day touch option?

6. ### Alexandre

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. ### mgabriel01

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. ### Alexandre

thanks guys.

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