Option true prob

[clarodina]

Have some questions about those prob figure on options

Say the the prob figure for a particular 5% otm call option is 73% not reaching for 230 trades

Are these figure valid? Say this option is selling for 0.30 and next month 5% otm call is selling for 0.10 and for some month maybe 0.01 or nothing due to lack of implied volatility

The 230 trades with main bulk of trades not valid for trading due to not enough volatility

With volatility is up the option maybe priced 0.20 or more enough to trade but those are the situation where price is about to decrease with volatility increasing

This makes the the true prob figure maybe lower than 73% and lower trades

Whats your opinion?

 

[FXforex]

Are these figure valid?

They are just as valid as the figures on the paint can label indicating how many square feet you can cover.

 

[1245]

Have some questions about those prob figure on options

Say the the prob figure for a particular 5% otm call option is 73% not reaching for 230 trades

Are these figure valid? Say this option is selling for 0.30 and next month 5% otm call is selling for 0.10 and for some month maybe 0.01 or nothing due to lack of implied volatility

The 230 trades with main bulk of trades not valid for trading due to not enough volatility

With volatility is up the option maybe priced 0.20 or more enough to trade but those are the situation where price is about to decrease with volatility increasing

This makes the the true prob figure maybe lower than 73% and lower trades

Whats your opinion?

I'm not quite sure what you are asking and how it relates to 230 trades. As a very general statement, which others will disagree with me, the current delta of an options is a estimate of the probability of that option being in the money, at expiration. That value is constantly changing as the stock moves and time passes. IT just provides an expectation for hedging.

Does that help, or are you asking something else?

 

[Martinghoul]

These implied probabilities are risk-neutral. They are not "true" probabilities, but they're the best you can get.

 

[clarodina]

Risk neutral? How do you prove implied is risk neutral? From the chart of stk and implied show low level of implied is during bull price and increasing implied is during price about to fall

 

[Martinghoul]

Risk neutral? How do you prove implied is risk neutral? From the chart of stk and implied show low level of implied is during bull price and increasing implied is during price about to fall

I don't have to prove anything. Various quantities implied from options prices are risk-neutral by construction.