Probability of profit

PoP is the probability that the front expiration’s P&L is above zero, summed over the price ranges where the Expiry curve is profitable. It is a model figure. The tooltip on PoP names the distribution:

• The expiration’s smile: when the Vol model is Skew and the smile for that expiration has been sampled, the distribution is the one the smile implies, anchored to the live leg nearest the money. The tooltip reads “the expiration’s smile, 14.2% at the money”.
• Lognormal at the at-the-money IV: otherwise (Sticky strike, a smile not sampled yet, futures options). The tooltip reads “lognormal at 14.2% IV”.

Note

PoP and the expected-move bands use the front expiration only.

For a calendar or diagonal the Expiry curve is modeled, because the back legs still carry time value, so PoP is a modeled figure there too. A cash index is centered on the level its options trade at, not the lagging print.

Using PoP

• Compare PoP across structures. Click a scenario to make it the focus and read its PoP, then do the same for the other. Higher PoP usually means a smaller credit against a larger loss, so read it beside Max L.
• Check what a vol jump does to PoP. Add +3 to the Vol what-if. PoP and the bands follow it.

PoP differing from your broker’s is by design, since platforms use other distributions. See PoP is missing or differs from my broker’s. Related: Expected move.