This Probability Rule Made Our Trades More Effective

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[@fuzzyboomboom9742]

This is a good one, short and sweet. But it clearly shows you have to take into account general market conditions and not count on deltas for an absolute estimate of risk.

[@djayjp]

For sure, skew and drift are very real factors.

[@icenomad99]

I have ran the same test on further OTM options and the relationship there is pretty much 1 to 1. The further OTM we go the less divergence there is between probability of a touch and probability of expiring ITM.

[@fuzzyboomboom9742]

Seems like the 2 should correlate to ATR, or to volatility. The more volatile, the more likely an option will both touch and expire itm. If that's right, a more useful study would look at a much shorter timeframe, so as to capture more current market conditions. With the SPX ATR moving from 40 to 60 in the last couple months, not possible to assume a 45dte option would be safe from expiring itm even @ 10 delta or lower.

[@Kokomadeta]

How do you perform your tests? What is the methodology?

[@MHN212]

Useful information.

[@Spudster1024]

interesting study, but it would have been more relevant to Tasty mechanics if they'd studied the frequency with which the option was ITM at 21DTE.

[@Nickc86]

Good to know. Makes me think that if my put side is broken hold on, if my call side is. Close early

[@jirifoltyn3321]

Ok-!!

[@user-rk7yh5bu5g]

Monte carlo simulation help with it.

[@masonite1973]

Selling calls sucks. Better to push the calls further otm if doing a strangle in a generally bull market. Unless you are trying to get called away on a covered long position.

[@ismaelersoz]

do the same research accounting volatility. this is nothing but IV relation to strike.