OptionAutomator Options Trading Glossary:

Definition, Examples & Resources:Probability Out-of-The-Money'

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What is Probability Out-of-The-Money in Options Trading ?

Probability Out-of-The-Money
Probability OTM (“Out the Money”) is the chance that the underlying asset’s price will end up either below a call’s strike price or above a put’s strike price at the optionsexpiration.

How to Use in Your Brutus Options Ranker Strategy

The Probability OTM is a profitability indicator as it looks at the chance your options setup will expire out the money.

If you are using a net-short options setup, you will want to maximize the probability OTM.  If the options expire OTM then you will keep the premium collected at trade entry.

If you are using a net-long options setup, you will want to minimize this particular value or use Probability ITM as an alternative and maximize the criterion's objective.

Broader Term

  • Expiration

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