How to use this calculator
- Enter the stock's current price and the target price you care about (for a true probability of profit, use your breakeven, not the strike).
- Enter the implied volatility and the days to expiration.
- Optionally set a risk-free rate - leave it at 0 for a pure-volatility read.
- Read the result: the odds the stock finishes past the target, stays short of it, or ever touches it before expiry.
What it tells you: the model odds a stock reaches, stays short of, or touches a price by expiration - so you can judge a strike or a probability of profit.
How this calculator works
It models the stock's price at expiration as lognormal — the same assumption behind Black-Scholes and the expected move. In log terms the return is normally distributed with a standard deviation of σ·√T (implied volatility scaled by the square root of time) and a small drift of (r − ½σ²)·T. The standardised distance from today's price to your target, run through the normal distribution, gives the probability of finishing beyond it. With the rate at zero the drift is just the volatility-drag term, so you get a clean volatility-only read.
The three numbers
- In the money (reach) — the chance the stock finishes on the far side of your target. This is the probability an option struck there expires in the money, and roughly the option's delta.
- Short of target — the complement, and the headline number for a premium seller: the chance an option struck at the target expires worthless so you keep the credit (before adjusting for the premium itself).
- Probability of touch — the chance price reaches the target at any point before expiration, about twice the finish-beyond figure. This is the one to watch for stops, alerts and the risk of being tested early.
Worked example
A fixed, hypothetical illustration — not live market data.
A stock trades at $100 with 30% implied volatility. You ask about the $110 target, 60 days out, with no rate — the calculator's defaults.
- Finishes above $110: about 19.9% — the chance a $110 call expires in the money.
- Finishes below $110: about 80.1% — a $110 call seller's odds of keeping the premium, before the credit cushion.
- Touches $110 at least once: about 41.3% — a bit more than double the finish-above odds.
- Distance: the $110 target sits about 0.84σ above the expected finish.
Using it well
Sellers live on the "short of target" number: a 1-standard-deviation strike sits near an 84% chance of expiring worthless, which is why premium sellers cluster there. For your real probability of profit, set the target to your breakeven — strike minus premium on a cash-secured put, or the credit-adjusted short strike on a spread — so the premium you collected is folded in. And always glance at the touch probability: a trade you would close when tested is breached far more often than it finishes a loser.
Common mistakes
- Confusing finish with touch. A level is touched about twice as often as it is closed beyond — size and manage to the touch odds.
- Using the strike instead of the breakeven. The strike gives ITM odds; only the breakeven gives a true probability of profit.
- Trusting the tails. The lognormal model understates extreme moves; real 2σ-plus events are more common than it says.
- Ignoring events. Earnings or news inside the window can shatter these probabilities — the model only sees the IV you typed.
Frequently asked questions
How are these probabilities calculated?
The calculator models the stock’s price at expiration as lognormal: the log-return is normally distributed with a standard deviation of σ·√T (volatility scaled by the square root of time) and a drift of (r − ½σ²)·T. The probability of finishing beyond a target is then the normal cumulative distribution of the standardised distance to that target. With the rate left at zero it becomes a pure-volatility estimate, consistent with the expected-move calculation.
What is the probability of touch, and why is it about double the ITM odds?
Probability of touch is the chance the stock reaches the target at any point before expiration, not just where it closes. By the reflection principle, for a barrier away from the current price that chance is roughly twice the probability of finishing beyond it — so a level with a 20% chance of finishing above has about a 40% chance of being touched. We compute it from the exact lognormal first-passage formula, so it stays correct even when the rate moves the drift away from zero — where the simple “twice” rule of thumb starts to slip.
Are these real-world probabilities or a forecast?
Neither — they are model probabilities derived from today’s implied volatility, the same way an option is priced. They tell you what the options market’s volatility implies, not what the stock will actually do. Real drift is unknown and real returns have fatter tails than the lognormal model, so treat the numbers as a disciplined estimate, not a prediction.
How do I get the probability of profit for my actual trade?
Set the target to your breakeven, not the strike. For a cash-secured put, the breakeven is the strike minus the premium, so enter that as the target and read the “finishes short of” figure. For a credit spread, use the short strike adjusted by the net credit. The strike alone gives the chance of finishing in the money; the breakeven folds in the premium you collected.
Why does this differ from my broker’s “probability of profit”?
Brokers compute theirs live from each strike’s own implied volatility and the current bid-ask, often baking in the premium and using American-exercise adjustments. This calculator uses a single IV you supply and a clean lognormal model, so it will be close but not identical. Use it to understand the mechanics and sanity-check, not to second-guess a live quote to the decimal.
Does it account for earnings or big news?
Only through the implied volatility you enter — and the lognormal model understates the odds of large moves. An earnings report, FDA decision or macro surprise inside the window can blow well past these probabilities. When a known event sits before expiration, treat the tail numbers as optimistic.
Related tools and guides
See the price range behind these odds with the Expected Move Calculator, price the option itself with the Black-Scholes Calculator, and turn the odds into a trade with the Cash-Secured Put or Iron Condor Calculator.
Learn the strike-selection logic in how to choose a strike price, or look up any term in the options glossary.
Educational tool only. Nothing here is financial advice. These are model probabilities from implied volatility, which is often wrong, and real markets exceed them regularly. Size positions accordingly.