Probability Calculator Want to know the mathematical probability of success for a given trade? The Probability Calculator can tell you. The Probability Calculator allows you to see how realistic your expectations are with respect to price moves. Given an underlying price, future volatility, and time period, the program instantly calculates the first, second, and third deviation price movements to the upside and downside. Add a target price and the calculator will tell you the probability of the asset being above or below that price on your target date. Add a price range, and the program will tell you the probability of being below the lowest price, above the highest price, and the chance of finishing between those two prices by your target date. Of special interest to option traders, the Probability Calculator will also tell you the probability of the underlying ever touching your target price(s) during the time period you are looking at. If a Matrix is open, the Probability Calculator automatically looks to that Matrix and fills in the first two fields: Current Price and Future Statistical Volatility. Current Price: If you haven't defined a target price, the calculator uses the "Last" price of the underlying asset. Future Statistical Volatility (SV): The calculator will use the current SV from the Model/Volatility screen. The third and fourth fields, Days Ahead and Future Date, are mutually dependent. Enter one and the other automatically updates. Once the top four fields are complete, the program
calculates the first, second and third standard deviation price moves,
both downside and upside. These are shown in the middle of the screen.
Standard Deviation,
from statistics, is a tool for measuring how widely a set of numbers
deviate from their mean. It is computed by taking the square root of
the sum of the squares of the difference from the mean. When applied
to a bell-shaped distribution, the 1st standard deviation encompassed
68% of the instances. |