I have found several new bugs in the graphical output of the “probability box”. These will be fixed shortly. At this very moment I am working on several new improvements in the calculator. I want to add several new features that will make this tool even more handy and powerful.

First of all I need short positions. In many cases (and those of you who do have some trading experience with options will agree) going long with options is to your disadvantage. You have certainly heard that over 80% of all options expire worthless without ever being executed. The reason for this is, that once you understand the probabilities, you can write (go short) with options that look profitable for the buyer, but never get into-the-money. People who write options usually understand the statistics and probabilities pretty well. It takes a pretty dumb and careless trader to write options (maybe even naked ones?) blindly without checking carefully one’s chances.

Anyway, I don’t want to convert this into a rant about dumb trading strategies. I might continue this in another post sometime.

What I was trying to say is this: going short in options is statistically more profitable than going long, because people who go short usually understand options better.

Therefore I decided to add this new feature to the calculator. Instead of going in and out of long positions, I also decided that it would be handy if you could simulate short (and mixed) positions as well.

Secondly I want to add trades of the underlying (short and long) to the simulation. For many option strategies out there you need the underlying in your positions.

So with these new features you will be able to simulate a whole new range of other option strategies. (E.g locking a covered calls in C/R)

I have just finished another big update of the Straddle Calculator!

Several improvements are on the way:

• Some bugs within the calculation module have been fixed
• Graphical Module has been improved
• User interface and functionality have been improved (e.g. now you do not have to hit a “calculation button”, calculation is done dynamically as you type new values into the fields)
• Probabilities module has been added

Now this probabilities module is something I’m pretty proud of. Its core is the simple fact that deltas calculated within the black-scholes module allow you to roughly approximate the probability that certain levels of the underlying’s market-price will be reached.

For example: If the actual market value (AMV) of a stock is 15 and you get a delta of 0.25 (for a call’s strike of 19) then the probability of that stock finishing above 19 is 25%. Deltas are a pretty good approximation-basis for these probabilities. Sure, you cannot rely 100% on these probabilities. But since the Brownian motion of stocks is still a pretty solid theory, deltas may at least help you in understanding statistical chances of your position. Now I have implemented deltas as probability-indicators within the calculator in two features.

First. If you click on Analysis->Probability of Profit you will get a message box telling you how likely it is whether you finish with a profit in your pocket or not.

Second, you can click and drag an area on the graph which will represent the limits of the underlying. These limits will tell you how likely it is that the underlying will stay within those limits at the expiration date of your options.

These new features give you the chance to even better analyze and understand straddle positions. I have already some additional improvements in mind so stay tuned! Btw, I receive a pretty limited feedback, it’d be nice if those who download these software told me their opinion. Thanks!

I have just fixed another problem with break-even points that appeared when the graph was somewhat “inclined” and crossed the profit/loss-barrier. You can see an example of such a graph below.

As I am continuously improving this software, updates may be coming almost on a daily/weekly basis. Therefore I suggest that you click often on the news button to know when the next improved version is available.