For any given options trade it is possible to estimate the probability of profit or loss. An estimate is nothing more than an approximation, but this information can be extremely useful in helping a trader to choose between several potential trades. It can also be useful in assessing the trade off between reward and risk for any given options trade. As a simple tool, an option’s delta value serves as a handy estimate of the likelihood that it will expire in the money. This information alone can often help smart traders to zero in on the specific option or options most likely to help them achieve their options trading objectives.

The historic volatility of the underlying security also can be used to estimate the likelihood that a given option trade will reach its breakeven point before option expiration. Information is power. Recognizing the likelihood of your success in advance is an area of analysis that far too many traders overlook.