When you sell an option you collect a cash premium upfront and retain it as net profit as long as the underlying stock stays away from your strike price.
The central analytical question is not how far a stock might travel, but how far it has historically failed to travel.
You input your target probability threshold (for example, 85%), and the engine delivers two immediate outputs:
The dynamic price band: a visual cone mapping where those probability bounds sit across every expiration cycle.
The option board: a filtered list of live option contracts whose strikes meet or exceed your criteria.
The top line is where selling a call worked 85% of the time. The bottom line is where selling a put did. Both sit further from today's price as the expirations get longer, because the stock has more time to move.
Understanding time horizon expansion
As expiration dates extend further into the future (for example, moving from 1 day out to 40 days out), both boundary lines expand further away from the current market price ($747.99). This reflects the simple reality that an asset has more time to make a larger directional move over longer durations.
Evaluating each boundary: directional vs. neutral risk
A common misunderstanding among option sellers is conflating single-leg probability with multi-leg range probability.
1. Single-leg options (calls or puts)
Upper boundary ($784.28): the level below which 85% of past historical windows closed. Selling a short call at or above this level yields an 85% win rate.
Lower boundary ($711.67): the level above which 85% of past historical windows closed. Selling a short put at or below this level yields an 85% win rate.
2. Multi-leg neutral strategies (short strangle / iron condor)
Each boundary line represents a one-sided tail risk of 15% (100% minus 85%):
15% of historical windows closed above the upper line.
15% of historical windows closed below the lower line.
Combined probability inside band = 100% − (15% + 15%) = 70%
Key takeaway for option sellers
If you sell a single-sided credit position (a short call or short put), your probability of success is 85%. If you sell a two-sided neutral position (a short strangle or iron condor using both boundaries), your probability of remaining inside the total band drops to 70%.
The probability cone is not generated using an abstract mathematical formula like standard deviation or implied volatility curves. Every point on the cone is derived empirically from the underlying stock's historical performance data. It is built expiration by expiration.
The construction process: expiration-by-expiration
Every expiration is built on its own. A 40-day contract is measured against past 40-day stretches, a 1-day contract against past single days, which is why the cone kinks slightly where one expiration hands off to the next.
1. Match time horizon to expiration
The engine evaluates each option expiration date independently based on its exact days to expiration (DTE):
For a 40-day expiration, it analyzes all historical 40-day trading stretches.
For a 1-day expiration, it analyzes all historical 1-day trading stretches.
Because each expiration date evaluates a distinct historical window duration, the boundaries are calculated individually. This produces subtle kinks or slope adjustments along the cone where the gaps between expiration cycles shift.
2. Rank returns by percentile cuts
For any given expiration timeframe, all historical price returns are sorted from worst to best. The Probability of Profit setting (defaulting at 85%) determines where the statistical cutoffs occur:
Upper boundary: placed at the 85th percentile of historical closes (85% of past windows closed below this price).
Lower boundary: placed at the 15th percentile of historical closes (85% of past windows closed above this price).
Why the cone is asymmetric (skew)
Unlike standard theoretical models that assume symmetric, normal distribution curves, this tool measures the upper and lower boundaries independently.
Market trait
Asset behavior
Impact on probability cone
Negative skew (crash risk)
Asset drops faster and harder than it rallies
Lower boundary sits further away from current price than the upper boundary
Positive skew (upward momentum)
Asset rallies sharply during expansion phases
Upper boundary sits further away from current price than the lower boundary
Setting adjustments and trade filtering
Adjusting the Probability of Profit slider dynamically controls both the visual cone and the active contract table.
The same slider moves the cone and the contract list together. A higher target is safer but leaves only distant strikes that pay little; a lower target brings the strikes closer, where the premium is richer and the risk is higher.
Raising the target (e.g., to 95%): demands higher statistical consistency. Both boundaries push further outward from the current stock price, filtering the contract list down to safer, more distant strikes.
Lowering the target (e.g., to 70%): accepts higher trade risk. Both boundaries contract inward toward the current stock price, revealing closer strikes that offer higher premium yields.
There are two distinct ways a short option position can experience an adverse price move, and they reflect two very different types of risk: expiration risk and path risk (intraday risk). The system measures both metrics and plots both curves on the probability chart.
Defining the two probability metrics
A trade can be safe by one measure and not the other. A stock can spike through your strike intraday, tripping the Touch risk, then fall back and close on the safe side by expiration. If you hold to the end, Close is what matters; if you use stops, Touch does.
1. The Close metric (expiration risk)
Evaluates whether the underlying stock price closed beyond the strike price on the final expiration day.
Strategic relevance: this metric dictates whether the short option expires in-the-money (ITM) or expires completely worthless at settlement.
2. The Touch metric (path risk)
Evaluates whether the underlying stock price ever touched or breached the strike price at any point during the life of the trade, even if only for a single minute before pulling back.
Strategic relevance: this metric measures intraday path risk, tracking price action that could trigger stop-loss orders or broker margin calls prior to expiration.
Metric comparison: SPY 40-day expiration example
SPY at $747.99, measured 22 July 2026, both at an 85% probability setting.
Measurement basis
Put strike (85% safe)
Call strike (85% safe)
Distance from market price ($747.99)
By close (expiration)
$711.67
$784.28
Put −$36.32 / Call +$36.29
By touch (intraday)
$688.07
$791.10
Put −$59.92 / Call +$43.11
Required safety buffer
+$23.60 lower
+$6.82 higher
Exposes downside volatility skew
Key strategic takeaways
1. The asymmetric downside skew (crash risk)
To achieve the exact same 85% touch-safe probability, the short put strike must sit $23.60 further out ($688.07 vs. $711.67) than the close-safe strike. By contrast, the short call strike only needs an extra $6.82 of room ($791.10 vs. $784.28). This gap highlights an essential property of equity markets: downside moves tend to be faster, sharper, and accompanied by sudden volatility spikes, requiring significantly more buffer space for intraday safety than upside rallies.
2. Selecting the right metric for your execution model
Use Close if: you follow a strict hold-to-expiration strategy without managing trades early or using intraday stop-loss orders.
Use Touch if: you actively manage risk, use stop-loss triggers, or operate in accounts sensitive to intraday margin calls.
Chart control
Use the chart legend directly above the diagram to toggle between the Close Cone and Touch Cone views.
Chapter 4
Historical vs. Implied Probability
The interface can project a third probability cone derived from a completely different data source. The Model toggle allows you to seamlessly switch the chart and active contract list between these two analytical engines.
The two analytical engines
The Model toggle swaps between the two. When they line up, live pricing agrees with history. When implied sits wider than historical, options are pricing in more movement than the stock has usually delivered, which is the setup an option seller looks for.
Historical model (empirical): counts actual historical price movements of the underlying stock over matching timeframes. It reflects what the asset has done.
Implied model (forward-looking): extracts probability bounds directly from current option premiums and implied volatility (IV). It reflects what the market is pricing in today.
These models operate independently. Comparing where they align, and where they diverge, is one of the most powerful tools available to an option seller.
Model alignment: SPY 40-day expiration example
SPY at $747.99, measured 22 July 2026, both at an 85% close probability setting.
Analytical engine
Put strike (85% level)
Call strike (85% level)
Variance / spread
Historical model
$711.67
$784.28
Baseline
Implied model
$711.72
$784.38
+$0.05 / +$0.10
The insight: the two bounds sit within $0.05 on the put side and $0.10 on the call side. Live option pricing and 40-day historical asset performance are in tight agreement regarding the expected range of the asset.
Identifying volatility edge: when models diverge
The most actionable trading opportunities occur when the two models disagree.
A visible gap between the historical and implied cones reveals structural pricing discrepancies. Option sellers seek environments where implied volatility inflates premiums beyond historical realities.
Chapter 5
Analyzing the Option Selling Table
Located directly beneath the probability cone is the live contract table, displaying every real option contract that meets or exceeds your minimum probability threshold. Results are sorted by return potential, displaying both Sell Put and Sell Call opportunities together unless filtered using the Direction toggle.
Data column breakdown
Column
Definition and strategic utility
Type
Execution strategy: Sell Put (bullish/neutral) or Sell Call (bearish/neutral).
Strike / Expiry / DTE
Specific strike price, expiration date, and exact days to expiration (DTE).
Bid Price
The premium per share collected upfront upon entry. Multiply by 100 to calculate total cash credit collected.
% OTM
Percentage out-of-the-money; the distance between the strike and current stock price.
Probability of Touch
Path risk: the historical likelihood of the stock touching the strike price prior to expiration.
POP By Close
Expiration risk: the probability of profit at settlement; likelihood of expiring worthless.
Annualized ROC
Normalized yield: return on capital scaled up to a 365-day annualized percentage.
Side-by-side probabilities: path vs. expiration risk
Placing Probability of Touch and POP By Close side by side on every row exposes trade dynamics that a single win-rate number hides. A contract showing an 89.1% POP By Close alongside a 22.1% Probability of Touch tells you that while the position has a high likelihood of expiring completely worthless, there is roughly a 1-in-5 chance the stock breaches your strike intraday, testing your conviction or triggering risk management rules before expiration.
Both numbers are true of the same trade. It will very likely expire worthless and hand you the premium, and it will still probably poke through your strike at some point along the way. A hold-to-expiration seller cares about the left number; a stop-loss seller has to respect the right one.
Understanding annualized return on capital (ROC)
Important Caution
Use the Annualized ROC metric solely as a relative comparison tool to rank different contracts against one another, never as a realistic projection of annual performance. Because it extrapolates a short-term credit over a full 365-day year, short-dated contracts (e.g., 2 DTE) can display exceptionally high annualized percentages that cannot realistically be compounded week after week without interruption. A 2-day contract and a 45-day contract with identical Annualized ROC figures represent two entirely different risk profiles.
The parametric tug-of-war: win rate vs. premium yield
Two primary user controls directly oppose each other in the search algorithm.
Turn both up at once and you are asking for a strike that is far from the price and richly paid at the same time. On a calm index that combination barely exists, which is why cranking both filters can empty the board.
Increasing Min Probability of Profit: forces strike selection further out-of-the-money, reducing risk but shrinking the credit collected.
Increasing Min Annualized ROC %: demands higher cash yields, forcing strike selection closer to the current stock price.
Setting both thresholds extremely high, especially on a low-volatility broad-index ETF, asks for a strike that is both far from the price and richly paid, a combination the market rarely offers.
Chapter 6
Naked Options vs. Defined-Risk Spreads
The Strategy toggle alters the underlying structure of the trades displayed on the board, switching between single-leg defined-yield trades and multi-leg defined-risk structures.
Defining the two trading strategies
Buying the $700 wing turns the trade from open-ended into a known worst case. You collect less up front, $1.20 instead of $2.50, and in exchange the most you can lose is fixed at $8.80 before you ever enter.
1. Naked options (undefined risk)
Structure: consists of selling a single short contract (short call or short put).
Capital mechanics: collects 100% of the bid premium upfront.
Risk profile: carries undefined downside risk if the underlying asset moves aggressively through your strike.
2. Credit spreads (defined risk)
Structure: combines a short option with a long option purchased further out-of-the-money as a hedge or backstop.
Capital mechanics: collects a smaller net credit (short premium minus long premium paid).
Risk profile: strictly caps your worst-case scenario to a known maximum dollar loss before entering the trade.
Data columns for credit spreads
When switching the Strategy toggle to Spread, the contract table updates to display multi-leg execution metrics.
Column
Definition and utility
Short Strike and Long Strike
The primary strike sold and the protective wing bought as a hedge.
Width
The total distance ($) between the two strikes.
Net Credit
The upfront cash collected after paying for the long protective leg.
Max Loss
Width minus Net Credit (the absolute maximum capital at risk).
Breakeven Price
Short Strike minus Net Credit (for puts) or Short Strike plus Net Credit (for calls).
What changes (and what stays constant)
Switching between naked options and credit spreads alters your trade construction while leaving the underlying asset probabilities unchanged.
Probability metrics stay constant: both Probability of Touch and POP By Close remain identical because both are measured relative to the short strike, which remains the primary determinant of trade success.
Probability cone stays constant: the probability cone maps historical asset price behavior, regardless of the specific options strategy built on top of it.
The trade-off
Selling a spread means accepting a smaller net credit in exchange for establishing a strictly capped maximum loss.