Options profit/loss vs probability and the rewards

[Melch002]

Not really. Just the fact that you have to say this is the proof that you provide no substance, no specific formula, no relation to Black-Scholes, and no research papers to point to. That’s like saying “herbs are widely used to cure cancer.”

You are 100% correct, I have no proof.

 

[Melch002]

AFAIK some commercial company invented this term to make gullible people think that they are looking at something relevant.

Thanks again and your reply is the proof that I need to study a lot more before I even think about putting real money at risk.

 

[newwurldmn]

Thanks for your reaction. I made the calculation for the AAPL put credit spread with strikes 134/133 (27.5), 135/134 (30,0), 136/135 (32,0), 137/136 (35,1), 138/137 (38,5) and for the at the money 146/145 (51,0), and the closer I get to the current stock price, the higher number I get from your formula. This "feels" not correct, since I'm looking for the highest possibility of keeping the net credit of the sold credit put spread.

the 135/136 has an EV of -.08 = (.24*-.84)+(.76*+.16)

so you wouldn't want to do that trade.

 

[Atikon]

In ToS the fill price is de middle middel between Bid/Ask, I think. I'm testing with very liquid high volume options/stocks like AAPL and there is not a wide spread. Do you know the difference with Interactie Brokers? Is their fill more to the Bid or Ask side of the price range?

Yeah ib def more on the bid size.