Position Sizing & Risk Controls
1.5%
$150
Black-Scholes + HV
Conservative rule: Risk ≤ 1–2% of account on any single trade. Never risk more than you can afford to lose.
Popular & more affordable underlyings (high options volume):
Fetching market data & running Black-Scholes probability model...
High-Probability Trade Ideas (Balanced R/R • ~65–75% POP)
Black-Scholes Model + Balanced Risk/Reward
- Historical Volatility (HV) is calculated from the last ~50 daily closes (annualized std of log returns).
- Risk-neutral probability that the short strike expires OTM uses the Black-Scholes
N(d₂)formula. - Assumptions: r = 4.5%, q ≈ 1.2% for major ETFs / 0% for single stocks, T ≈ 10/365 years.
- Target zone: ~0.8σ OTM → roughly 65–75% POP. This produces more balanced risk/reward (better credit relative to max loss) than ultra-high-probability far-OTM spreads.
- Max Potential Gain = the full credit received (credit spreads) or a reasonable profit target ≈ 2× debit (debit spreads).
- Expected Value (EV) ≈ (POP × credit) − ((1−POP) × max loss), scaled by contracts × 100. Positive EV indicates a theoretical edge under the model — not a guarantee on any single trade.
- HV is used as a proxy for implied volatility. Real IV is usually higher → actual POP (and EV) may be slightly lower.
Always verify live option prices, Greeks, and open interest on your broker before placing any trade. This is an educational tool only.
Ready to find high-probability setups
Enter a liquid ticker or click a quick button. The tool runs a Black-Scholes model on historical volatility and sizes contracts to your risk rules.