Pricing & Mechanics
Probability of Profit (POP)
Also called: POP
Probability of profit is the model-implied chance that an options position finishes with at least a $0.01 gain at expiration, based on current implied volatility and the position's break-even prices. It is not the probability of reaching maximum profit.
POP comes from the same lognormal distribution that prices the options. For a single short option, a common shortcut is one minus the strike's delta (a 30-delta short put has roughly a 70% POP). For multi-leg positions, POP is the probability mass of the underlying's distribution beyond the break-even points.
High-POP trades usually pair small gains with larger, rarer losses, so POP must be read with expected value and maximum loss. POP changes continuously as price, time and IV change, and it says nothing about early management, where many sellers lock in gains before expiration.
Formula
POP ≈ P(S_T beyond break-even) under the IV-implied lognormal distribution; short single option ≈ 1 − |delta|
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Frequently asked questions
Is a high probability of profit trade a good trade?
Only if the expected value is positive after the tail losses. A 90% POP trade that loses ten times its typical gain the other 10% of the time is break-even at best.
Why did my probability of profit change?
POP recomputes with every change in price, IV and time. A move toward your break-even or a rise in IV widens the loss region and lowers POP.