calculate win probability . how i do this

Gimpyron

Gimpyron

Hello everyone

I started trading stocks with the simplest strategy, DIM bull call spread.
for isntace:

AAPL trading for 108

Buy leg- call 98
Sell leg- call 103

I do this trades weekly, mon-fri.
My main goal is keep it safe and get rich slowly, somtimes i write the spreads even deeper in the money. Get monthly returns of 10 percent is the ideal situation for me.

My question for you guys the experienced traders is how do i calculate this strategy win probability?
(Oldnemesis seems to calculate that stuff pretty clear)

PS, is there any other safe trades that can provide me lovely small profit? - your thoughts and opinions are more than welcome

Best wishes ron!
 
if you need to ask such a basic question you shouldn't be trading options. You do not know enough to even profit (in knowledge) from your losses.
 
Despite your pessimistic words i'd like to thank you for your comment and im happy its you who wrote that (maybe its because i mentioned your name?- who knew you such intolerant).

I am still learning and i'm at the beginning of the journey.
I started reading books and this strategy seems to be the easiest way to get going. (trading low cash around 5-10k).
About this kind of comment, spare me the dad advice about do or do not trade and let me take my risks.
If you would like to answer my question then please go ahead ill be happy to hear from your experience trading, if not it is ok as well, just save me this flattened responds.

Let me make it clear, i buy 5 point spread (in that case) for lower than its worth (5). for instance 4.87.
my profit = 0.13/4.87 = 2.66% a week.
I know to roll over my positions deeper in the money if needed.

My question was how you calculate the odds ( +, - ) for successful trade.

Have a nice day.
 
Deep in the money is where probabilities and realities overlap. Not going to look these up but use your deltas as approximate odds of being ITM. Your long has about 100% chance of being ITM and your short will be about 95%. This is why there is no tradable value in your spread. The wide bid/ask for DITM will cancel out all hopes. Yet you say you are doing this. How are you getting profits out?
 
Short term, it's easy to imagine extracting profits from DITM spread trades. Shit just hasn't hit the fan yet. It won't, except for that 1 out of 10 times it does.

How you manage those trades seems key, if anything.
 
dont you just use the standard deviation?
for example, if your goal is to collect credit of a put with a strike at 100, you need calculate thr prpbability that an underlying will remain above the $100 price point for that time. to do this, the simplest formula is the standard deviation formula where you use IV.
this gives you a one standard deviation move, which you reference the normal distrobution curve for apprpxomate probabilities.
 
phili said:
Deep in the money is where probabilities and realities overlap. Not going to look these up but use your deltas as approximate odds of being ITM. Your long has about 100% chance of being ITM and your short will be about 95%. This is why there is no tradable value in your spread. The wide bid/ask for DITM will cancel out all hopes. Yet you say you are doing this. How are you getting profits out?
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good at scalping the legs? if these have close to 100% being right, and youre making 5-10 per after commission, this can add up.
 
crayon851 said:
good at scalping the legs? if these have close to 100% being right, and youre making 5-10 per after commission, this can add up.
More...

How would you go about scalping this? If you mean legging in and out the odds you are interested in maintaining are now out the window. I guess you could put the long on during a pullback and then put the short on during a rally. It’s a tough play anyway but with the ITM b/a spreads even harder. If tried I’d go after a much better fill than 4.87 for the legged into spread. How have you been trading these and how have you been getting paid?
 
phili said:
How would you go about scalping this? If you mean legging in and out the odds you are interested in maintaining are now out the window. I guess you could put the long on during a pullback and then put the short on during a rally. It’s a tough play anyway but with the ITM b/a spreads even harder. If tried I’d go after a much better fill than 4.87 for the legged into spread. How have you been trading these and how have you been getting paid?
More...
i agree it is hard, but i found it odd or extremely lucky on my recent baba trade. i put a debit spread on for a 36 debit with a spread of 103/104. 103 was at 2.28 and 104 was at 1.91. according to the charts, the 103 never even hit 2.28.

any explanation on how this happened? im curious
 
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