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You would need to know implied volatility for a given delta. If you can't get it, you won't be able to use the previous formula.

This is a "reasonable" measure.

To get a ‘pure’ linear exposure to the skew, a simple ( var swap – gamma swap ) spread would be « reasonable » enough. You then just need to be focused on the relative replicating portfolio values. It’s straighforward to price.

You may be right Martin. Of course those various points are all well-known, that's what makes me get started. Anyway, My bad.

No Robert, It would be a 25% chance if the underlying followed a brownian motion and it had a drift that equals cost of carry. And it's wrong in real life. Cmon. The second point is that it's model dependent when used for option pricing.

Sorry If I’ve been rude, « big swinging dick », « bullshit », ....were not part of my words, but I will improve myself. Let me be clear : 1) the real probability of being in the money at expiry just can’t be known. If it were, all traders would tell you that a quite simple...

You may be right Martin. My point was just to say that delta is not a probability at all, and I thought that could be helpful for newbies. Since I said that, 'Bronsky Beat's people who can't stay out of a thread tried to tell us we were morons, just for fun. Great ! You know, those guys who...

The same way you're going to share Fields Medal with sle.

No !

+1

You can call every friend you got : a delta is not a probability. Is it clear ?

An answer ? Maybe not.

Quote me, you be safer.

Keep editing you're missing the point. An answer maybe ?

Please could you elaborate, it's starting to be funny. Do you thing that delta is a probability (because that's OP's question, remember ) ?

As an experienced exotics book runner would you claim that the delta of a down and out call that could be much higher than 100% remains a probability (risk neutral or real one) ? You got to be kidding ! But there is nothing wrong with that as far as +0.5.vol.vol and -0.5.vol.vol are the same...

Both ! As far as + and – are quite different signs, and in a pure BS : Delta is N(d1) with d1=[log(S/K)+ (r-d + 0.5.vol.vol)(T-t)] / (vol.sqr(T-t))] Risk neutral prob is N(d2) with d2=[log(S/K)+ (r-d - 0.5.vol.vol)(T-t)] / (vol.sqr(T-t))] There is a sign difference between...

Guess what, try this on a Single Stock Future on Lehman or MFGlobal ! For sure, 100% in the money !

Where on earth does it mean you can tell them something that is clearly not true using sources which are far from being reliable ?

Need to know the difference between risk neutral probabilities and the real ones. That's dual delta. There is no "correct, exact calculation for the probability of an option finishing in the money" in the real world. I hope that your 'business advisory' is not based on wikipedia !