Automated Options Trading #2: What is Expected Value (EV) & why should you care?

optionalpha.com - Expected Value (EV) is a fundamental concept in probability theory that provides insight into the outcome or value of a random variable. To put it simply, EV is a weighted average of all possible outcomes. It serves as a powerful tool for decision-making and risk assessment. In options trading, calculating the EV of a trade at expiration is useful for evaluating its potential profitability. To accurately calculate the expected value for an options trade, we found it critical to assess the probabilities and associated payoffs not just for a single profit/loss scenario but for every profit/loss scenario.
Learn more about how we calculate EV here: optionalpha.co...
Learn more about how we calculate probabilities here: optionalpha.co...
Want to follow this series? Click here to Subscribe to updates: www.youtube.co...