Probability Cone

This metric uses statistical data to forecast future prices with specified probability. It plots a standard deviation bell curve designating ranges within which prices are expected to stay for each following expiration dates in the future..

Probability Cone is useful to help identify where the asset price might go to before the expiration date, using standard deviation from option deltas.

Probability Cone

Here are some parameters you can change on the Probability Cone metric.

1. Volatility [Vol] - Change this setting to a preferred Implied Volatility level to project the probability of price expected in the future.

Higher volatility will reflect a wider probability cone.

Lower volatility will reflect a narrower probability cone.

2. Interval Confidence [IC] - Change this setting to simulate wider or narrower statistical price deviation.

For example, if 68 is input for IC, the probability cone will show an area where the prices might stay in, with a 68% probability (1 S.D). If 95 is input for IC, the probability cone will show an area where the prices might stay in, with a 95% probability (2 S.D).

Higher Interval Confidence will reflect a wider probability cone.

Lower Interval Confidence will reflect a narrower probability cone.