Stocks & Commodities V. 33:02 (16-20): Kiss & Touch With The Modified True Range by Chris Lindgren

Stocks & Commodities V. 33:02 (16-20): Kiss & Touch With The Modified True Range by Chris Lindgren
Item# V33C02_924LIND
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Product Description

Kiss & Touch With The Modified True Range by Chris Lindgren

A Double Shot

What is the probability of an underlying reaching a certain price prior to expiration? Find out using this new indicator.

When we talk about trading options, we almost always focus on the optionís probability of expiring in-the-money. This article is about the forgotten son of option trading: the probability of an underlying touching or reaching a certain price any time prior to expiration.

Traditional option-pricing models such as Black-Scholes incorporate the probability of an option expiring in-the-money (ITM). Most option contracts though, are closed early. According to the Chicago Board Options Exchange (CBOE), 55Ė60% of all contracts are closed prior to expiration. I suspect that this number is much higher for active traders.




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