Standard Deviation: Short Put 1 SD below Stock Price = 84% Probability of Closing OTM

[@arcticdoc]

In my opinion, this is one of the top 5 videos I have watched from Tom and Tony. Loved it.

[@bleacherz7503]

The problem is that volatility is not constant and prices are not always normally distributed

[@jonesr227]

Let the current price be at the center of the bell ccurve; then 1 SD variation contains 68% of the area, with a remaining 16% of the area on the high side and another 16% on the low side. So if you sell a put at 1 SD below the current price then there is 84% (68+16) that is above the put strike price. So there is 84% chance of expiring OTM.

[@man_named_nobody]

Lucid explanation. Thanks.

[@Brigadorski]

Ok, but, what will the premium look like? I'm not sure which target to focus on because people say to sell short option with the 30 delta (70% probability to expire OTM) or 1 SD from the price of the underlying (84$ probability of expiring OTM).

[@G8tr1522]

thank you, i was wondering where 84 came from. i feel stupid now, lol

[@phunkthat4124]

Half the 68% of 1 SD plus all the ITM area at the moment of shorting (68%/2 + 50%)

[@Essays4College]

What is the SD though? Let’s say the stock is at $100. What price is 1 SD away?

[@Firstmajortomlikestoticker]

This is Truly PROFOUND !!!!!! 06:51 I Love it Tom This is some of the Best Info....I have heard for free!!!!

[@emye35]

You're here too my guy!? 😁 What happened to Leo's 13 Market Moves???

[@pankajsinghals1]

Really doing wonderful job with so much humility, hats off to you guys👏👏👏👏

[@tinawang6362]

here in 2021 but still dying at how he said "I don't know what's happening but that stock has been dead to me for a while" LMAO

[@Dpaq13]

We’ve all been there

[@kbram7363]

@@Dpaq13 indeed

[@faezeamini-q6c]

Guys, this trading strategies really works. I tested them few times and it works pretty good

[@cj18333]

I like these guys, easy to understand and no hurry on explanations. Thanks for making the videos!

[@RedondoBeach2]

They seem to have ADD. They can't stay focused and continually interrupt.

[@cj18333]

@@RedondoBeach2 Just like when we sit and talk. I will never interrupt anyone but they talk like we would to each other.

[@brads215]

Another great video. I am hoping to find more about calculating probability of profitability. I gather that the premium received figures into that... I know you like around one third the width of the strikes for probability reasons..... thank you for teaching what you know. It has helped me a LOT!!!!

[@NWKastaways]

This is a good question. My answer would be to add in your own technical analysis to the mix. That would up your chances by being directional which would raise your probability of probably being profitable in the trade. Just remember, PoP is just making $0.01 at minimum on the trade. What're your thoughts?

[@crayon851]

Why would you use the current price as the center point? so you calculate the upper and lower limits of the current price based off the implied volatility? ex IV=10, current price = 10, upper =11, lower =9, so a strike of 8 would be ideal?

[@tomstephenson301]

Best video, simple, strait forward, easy to understand 👍

[@nasdin94]

Other than the SD. You can also use the ATR, Average true range. You could have SD + ATR + Eliott wave count. That's an incredible edge. Not only do you know that it has a low probability of being in the money for selling puts/calls. But you also know when to stop selling calls/puts cause you know when the BigBoys have reversed their positions using eliott wave analysis

[@roy.mclean]

What is the mean in which the standard deviation in reference to? I assume it is in the U/L share price. How do you determine the strike to buy? If XYZ is at $144.00 and the IV is 22 percent do I sell a put with a strike of $112.32 (144 x 0.78)? I don't' think I'm connecting the dots very well because there doesn't seem to be that much interest that far out of the money. Or could the IV be in reference to the premium? If the ATM bid price is $3.64 do I sell the strike price that has a premium of $2.84 or less (3.64 x 0.78)? That seems easier to trade. I'm just learning. I started thinking that options would be a good way to hedge my stock trades but as I read more I seemed to fall farther down the rabbit hole.

[@brx017]

84% OTM = .16 DELTA... 1.0 - .84 = .16, Volatility will move the Deltas around, so just look for the strike that's currently at .16

[@figh761]

What is this 2 SD strategy. How much margin we need to sell naked puts

[@nasdin94]

Count eliott waves to judge trends and the strengths of the trends. See volumes for Volume spread analysis. If you counted the eliott waves and it seems that the trend is losing momentum at wave 4 /5. Then stop selling puts. But if the eliott wave has still not ended, then you can continue selling puts+ 1 SD below stock price. Do inverse for selling calls.

[@spaghettimonster6323]

One MAJOR problem. The market doesn't fit the Normal deviation distribution. The chance of 5*SD move is 1:100000. In any given day, you have stocks moving 5*SDs. The market itself made 5*SD moves 5 times in very recent history.

[@SheshagiriPai]

Those are called 'wipeout' outliers :).

[@johnnymomascaro]

Citing outliers and anomalies to prove a point actually proves Tom’s point thank you. We manage winners and cut off those outlier losers ASAP and put on another trade with that cash to keep the law of large numbers/averages in our favor.

[@NWKastaways]

So do we input for a different model that has abnormal distribution? What's the solution here?

[@dancasey9660]

Is the 1 SD skewed to below the strike price when selling puts?

[@richardpellis]

Yes. 1SD below the current price of the underlying you are trading.

[@sistematico17]

what is "the strategy" they keep talking about?? any link or video?

[@tastyliveshow]

Here is a more modern video on selling puts: www.google.com/url?client=internal-element-cse&cx=015477303216471237373:u_cnlyqjhzi&q=www.tastytrade.com/tt/shows/market-measures/episodes/selling-puts-a-thorough-analysis-04-18-2018&sa=U&ved=2ahUKEwj5q76nhJjnAhVIZ80KHVT_BCwQFjACegQIBRAC&usg=AOvVaw0tvIWA3mGV3OO_VAN2aNmZ

[@joesemo]

You did not say what the time till expiration is. I think Tasty likes to 45 DTE. Does the 1 SD 84% Probability of Closing OTM Have a time limit? thanks. So the CALL and PUT we sell should be at the 15% ITM on an Iron Condor?

[@JoshuaNgMusic]

I was wondering about it, too. The timeframe is never specified but it's so important.

[@codesymphony]

@@JoshuaNgMusic they usually aim for 45dte or between 30-60 days

[@movin10120]

Ttttttmn

[@sciencelabvideosl7558]

Help! How do I find 1 standard deviation below the stock price?

[@tomaschazarreta1263]

One question, how do we determine what the standard deviation is?

[@manu.francisco]

You can always look up the statistics formula. However, implied volatility is the equivalent of 1 SD.

[@FionaRothenburger]

This investment tactic looks really interesting Think I'll test it soon

[@AJohnson0325]

What does the probability of finishing OTM do when you close or roll the trade at 21 DTE?

[@crayon851]

I also did the math and this isn't really realistic considering most popular options have IV +50. example IAG , to short put 1 SD below the stock price of 5.44, the lower limit strike would have to be below $2. which yields next to nothing. so in reality you cannot make a good profit off this.

[@Snappingttturtlle]

video starts at 2:14

[@grantleydickinson5445]

I have been scouring the net to find how to determine what one SD is based upon a current price of a stock? Please help?

[@fannyfx1668]

Comparing to other similar sites: • We pay more: 50-80%, others 30% or much less • Faster: we pay till the 5th of next month, others on 25th or later. • We have more brokers: over 70 at this moment and are adding new ones all the time. • We use many payments methods: PayPal, Webmoney, AlertPay, Moneybookers, Neteller, Credit Card, Bank, etc. Others only Bank or PayPal. • And there are many more things that distinguish us and our program from the others.

[@kamran6336]

Which delta would be considered 1.5 SD?

[@NWKastaways]

Translate it to Delta readings. For example, what are the chances a .15 Delta will be ITM or ATM?

[@silverbaboon]

I believe the correct statement should be: A stock will close within 1 SD up or down 68.2% of the time.

[@GetMoneyCorporateA]

Bam! Thanks!

[@cmhvacr1010]

Market Index Builder your soooo good looking friend

[@Lil_mar00]

Market Index Builder lol While watching I’m like, this slide is wrong haha. Glad I wasn’t alone.

[@lusmas99]

@MarketIndexBuilder - What is the timeframe? Close when? From Close Previous day to close of current day? Close at expiration? Hope you can clarify this too. Many thanks

[@silverbaboon]

@@lusmas99 Timeframe can be anything, 1 day, 1 week, 1 month and so on. Every timeframe has it's own normal distribution STD. The larger is a frame time, the larger is the distance stock moves from the current price.

[@donpeirce]

How do you calculation Deviation?

[@cedrickerbidi4519]

Hi, for smaller accounts, should the puts sold always be cash-secured or is it okay to have the position only partially covered ? What if the stock price gets dangerously close to the strike price before expiration, or even ITM ? Should we then roll out the position ? (assuming we want to avoid early assignment at all cost)

[@tastyliveshow]

We typically roll out in time if we want to extend duration and extrinsic value associated with the option , but it's really up to you.

[@danielchang7306]

I agree with that. Part of the equation however is, how do you define a move? I don't think it's as clear-cut as appears on a chart.

[@matthewellis3004]

What is the definition of one Standard deviation?

[@codesymphony]

68%

[@Saahib_K]

All looks good on slides but would believe these numbers only when you show us a real trade example where this has worked. Id like to see what kind of premiums exist at 1SD. If its peanuts, then comissions would just eat it away even if it turns out a winner.

[@steve_____K307]

Thanks for all the good material. One aspect that I think could have been emphasized more here is the reality that having 84% of our trades win might easily still leave you with an overall portfolio loss. As you know it is not as simple as just having a large sample set to insure an overall profit unless it's the case that you earn as much on the winners as you stand to loose on the duds. But of course we know that all it takes is 2 nasty losers to completely wipe out the gains of the 8 winning trades. Unlike a coin toss, the outcome is not symmetrical. Again, thanks for everything.

[@julier1080]

That’s why it’s referred to as picking up nickels in front of a steamroller

[@kamran6336]

If you are trading small

[@steve_____K307]

​@@kamran6336 Hi Kamran, my comment was pointing out the difficulty of making consistent forward progress and how having a large trading sample set doesn't really seem to satisfy the goal (in my experience). I wasn't expressing a concern that 2 losses could wipe an an account.; hopefully nobody would set trades up with that potential.

[@kamran6336]

@@steve_____K307 The edge is in your mechanics, not the bankroll. Theoretically, any premium selling strategy will work long term if you meet the necessary # of occurances and trade small.

[@brwok57]

That's why you manage your losers and instead of taking a big hit you end up either just tying up a lot of buying power for months or getting assign shares you'd be happy buying at that price anyway. Unless the company goes under you' usually shouldn't "wipe out your account with 2 nasty losers". I don't have a very large account but applying tasty trades principles to the wheel strategy has given me such peace of mind...I'm always in control even when I'm losing.

[@crayon851]

hes actually worth about 600mil according to google. But alot of these selling options at low IV, is very optimistic in that you cannot really get a good sell price within 30-50 days, unless you go within 5% of the current price. but given the average IV they are all above 50%, and selling outside 1D doesn't cover these probabilities.

[@samirnaik2524]

"sell a put 1 SD bellow the stock price" for example Stock value 500 and each strike different is 20 (440-460-480-500-520-560) so what is means "sell a put 1 SD bellow the stock price" which strike 🤔. ex. SD= 1.96 and stock price 500 = 500-1.96%=490 so I can sell 480 strike am I right ? 🤔🤓🤔

[@saleh.hashmi]

look at ITM probably.... 10% ITM probb that's all u wanna sell

[@hybriddude007]

Sell at 84% or higher OTM prob for put/call options, with 30-45 Days expiration, that’s all you need

[@EvanEvansE3]

Why is 1 SD = 84% chance of finishing OTM, if 1SD = 68.2%?

[@jean-philippemontout3708]

great start training in option and stat.

[@xwhite2020]

Says.nothing.about.yeild.read.it.again

[@SamirNYC]

so 1 SD has about 84% chance of winning. is that equivalent to .16 Delta?

[@DaBooster]

yes that is correct

[@Akash.Chopra]

They are always so surprised and interested at their own words.. Their great and I love the videos, just found it funny.

[@rchill4556]

Fascinating stuff and they got their analyst finding new ways of reconfirming the ideas.

[@dansalvaggio]

But how do you find which strike is 1 SD away from stock price???

[@andylaque]

Any option with a 0.16 delta value is 1sd away.

[@johnwaas4864]

Good video but doesn’t this assume these are Gaussian distributions? I see no evidence the markets follow even ugly distributions like gamma or lognormal let alone normal distributions.

[@NWKastaways]

So what's the solution here?

[@susancollins1809]

You know how to make profit almost without risks... That's cool, cause sometimes you want be extremely safe🦍

[@markhandley3759]

What is the formula for calculating 1 or 2 standard deviations from the price of a stock?

[@MrSupernova111]

+Mark Handley . You need to export the data from yahoo finance or such. Then you can input the formulas in excel. Plenty of youtube videos show how to calculate STDEV. Not difficult.

[@nilupradhan5349]

hi Nasruddin, You seems to be vey accomplish trader culd you please upload something how elliot wave +sd+atr is an incredible edge. it would be great help

[@williampruitt6978]

Is this still relevant in today's mkt. 10 yrs later..

[@NWKastaways]

So much more relevant nowadays.

[@paypip1989]

You don't stay on the floor of the CBOE for any amount of time if you don't make money. The guy's never drawn a paycheck so I'm guessing he's done well over the years.

[@codesymphony]

he makes money from thinkorswim and tastyworks and selling courses

[@jokre75]

Tony Battista is 3 SD more charismatic on camera in 2023!

[@joodgulf]

But one loss is enough to take four times profits gained , if there is any strategy can cover this problem i will be the richest man in the world

[@yelgabs]

mego Uhm, if your legs are getting tested, you're supposed to play defense. Watch the last few episodes of Where do I Start with Case about it. Learn more. Why would you just let it get exercised? ...

[@ShihabPersonalFinance]

you have to take enough credit so the probabilities make sense in the long run, if you go for 90% probability of profit, with 5 point wide strikes, then you need to take in a credit of more than 50$, because 90% of 50% minus 10% of 450$ is 0, so in the long run, probabilities will play out and you will break even, if you collect 100$ on a 90% probability of profit, you will lose 400$ 10% of the time, so thats 90-40=50$ over time, dont forget that you can adjust the losing trades and lose less than max loss

[@figh761]

Can anyone make a million using options in a year with starting capital 100k.

[@jonesr227]

@@figh761 That's a CMGR (Compound monthly growth rate) of 21%. Not likely to be achieved.

[@BB0NES]

@@ShihabPersonalFinance can you expand on this more please. 5 point wide strikes on what type of trade? A spread?

[@sudhirchettri]

provide excels

[@rewalczak74]

Think or Swim does it for you.

[@ratiranjansahoo3895]

what is 1 standard deviation kindly tell me .I am not understand

[@codesymphony]

it's a fancy way of saying 68%

[@bluecollarstudio8513]

Of all the seminars I've seen Tom do, I've never seen him make money during open hours. I think he lost $50k on a strangle in Vegas.

[@Dan16673]

He makes money talking about trading no actually trading.

[@Brigadorski]

does he have statements we can see

[@codesymphony]

who cares. do you find the information valuable or not

[@AntoninGuillot-s3d]

This guy knows a lot about binay options, listen to his advices

[@dannysong5645]

Wow tony looks so young here

[@crayon851]

I dont get how selling out of the money 1 std yields 84%(68+16). Wouldnt the percentage be under 34+16%+ remaining?

[@OndrejL]

selling an OTM put at around 1 SD will result over several trades in 0 profits minus commissions (due to more or less efficient option pricing) i.e. your loss - win for the broker.

[@lijojohn7168]

Ondrej L Robinhood

[@ianmccormick247]

Im curious how you figure. I bring in a few hundred a week doing it

[@OndrejL]

@@ianmccormick247 if your cumulative profits form more less a non declining curve after about 100 such trades then it works for whatever reason, but most likely u will be somewhere around 0

[@Psi-Storm]

@@OndrejL The premium received moves you out of the 1sd range, so your break even point has a higher percentage of winning. Robinhood skims on the option fill rate and has much higher margin interest.

[@horacegreenleaf1543]

The market does not obey gaussian distribution

[@iannickle8386]

Yes it does. Its center is a little bit on the upside but in the short term it's hardly noticable. You can see this in some companies a call and a put don't have the same Delta ATM.

[@bretthong6137]

Anybody still trading here in 2022?

[@thepizzza]

I would give you a 1000 likes but it'll take me forever. So I give you 1000 typed likes!

[@xwhite2020]

He.sold.TOS.for.750million.Do.you.homework

[@figh761]

Is a retail trader can make 750 million by options trading. I don't think so.we have to do some value business.

[@xwhite2020]

@@figh761 T O S was his business. Not a stock holding.

[@chilly2171]

All the talk of SD, and they didn't even cover DTE LOL. What experts.

[@codesymphony]

45 days

[@Bokgat]

I don’t think you understand what the difference is between iv and hv. If you do, then have the balls to reply

[@paradiselosing]

around how many deltas is 1 STD move?

[@brx017]

1 - .84 = .16 Delta, that's what strike you want to look for