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Probability of the option expiring between the upper and lower slider bar.Since 145 is the call you’re considering for purchase, this is also the same as the probability of the option expiring in the money. If you set the upper slider bar to 145, this would equal the approximate Delta of the 145 call (.3762) or 37.62%. Probability of the option expiring above the upper slider bar.If you set the lower slider bar to 140, this would equal 1 minus the approximate Delta of a 140 strike call or (1 –. Probability of the option expiring below the lower slider bar.Now, if you select the Trade & Probability Calculator tab, you’ll see the following additional calculations are done automatically and displayed graphically (shown in the green box in Figure 2): These values are also automatically calculated for many other option strategies although the formulas are different. The maximum gain for long calls is theoretically unlimited regardless of the option premium paid, but the maximum loss and breakeven will change relative to the price you pay for the option. Breakeven (BE) = strike price + option premium (145 + 3.50) = $148.50 (assuming held to expiration).The following price calculations (shown in the purple box) are done automatically: Suppose you’re considering the purchase of 1 IBM 145 Call at a price of $ 3.50 when the price of IBM is $140.92 (see Figure 2). For example, you can edit the default implied volatility, dividend yield, and interest rate settings to see how this might affect the outcomes, both numerically and graphically.įollow this example of how the Trade & Probability Calculator works in action: View resources from The Charles Schwab Corporation.Īll option pricing inputs can be changed, which allows you to view the price levels and probabilities that are most important to you. Current market volatility represents unprecedented times for employers and employees to navigate.Retirement plan, stock plan and compliance solutions for employers, including those offered through our affiliate Charles Schwab & Co., Inc.
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