What is probability of profit (PoP)?

Where the number comes from

The platform values the position through a model, usually using current implied volatility, and works out the share of price scenarios in which it is worth more than it cost at expiration. Some brokers instead show the probability that price never touches the break-even along the way — the same label, a materially different calculation.

Which variant your platform shows is usually in the documentation and rarely on the screen. The difference is material: the probability of never touching the break-even is always lower than the probability of finishing beyond it.

What it says and what it does not

A PoP of 80 percent describes a win rate, not a return. On credit strategies a high win rate and an unfavourable risk/reward ratio come as a pair: maximum gain is the credit, maximum loss a multiple of it. Only both numbers together say anything about how a series of such trades develops over many repetitions.

Comparing two strategies on PoP alone is therefore worthless. A long call at 35 percent and a credit spread at 80 percent can carry the same expected value; what separates them is how often and how hard they lose.

The common misreading

The figure inherits every assumption of the model, including the one about how prices are distributed — and that one understates rare large jumps. It also assumes holding to expiration; closing early trades a different distribution. And it always describes a single trade, never the risk of several correlated positions in one account.

Strategies where the term matters

• Bull Put Spread — Do you want a credit against an obligation - or would you rather pay a debit?
• Short Iron Condor — Is the range you expect genuinely narrower than the move the market has priced in?
• Cash-Secured Put — After a 30% drop, would the strike still be a price you actually want to pay?

Related terms

• Expected move
• IV rank
• Break-even

Every term in one place: the options glossary.