Dan Sheridan’s method seems pretty good and easy:
Add the delta’s of the short strikes and subtract that from 100%
More conservative is on TOS it gives the probability of the individual options on the option chain (select in the “layout”), add the shorts together and subtract from 100%.
From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of Lady
Sent: Friday, June 11, 2010 9:38 AM
To: OptionClub@yahoogroups.com
Subject: [TheOptionClub.com] IC
I put in an IC on an index :
spread between buy sell on either side is 200
and net profits are 70 :
the strikes are 3 times either side of current INdex .
and the net delta of the spread is 0.06
http://img328.rockyou.com/imagehost/17/17417/17417262/17417262_e39252331276263155.jpg
The equation is shown on that url ..
What i was wondering is what is the probability of success of the IC.
Is it the net delta or the probability given there ..
also suppose the index comes closer to one of the extremes what remedial measures should i take .or should i just close out the Option trade ..
Thanks ..
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