OptionsFormula

Probability Trap Lab - Updated 2026-07-31

The Probability-of-Profit Trap

Compare probability, average gain, average loss, maximum gain, maximum loss, costs, and trade count so the attractive percentage gets translated into expectancy.

Open the calculatorStudy examples
Reviewed/updated 2026-07-31 Educational use only Transparent formulas No live prices or individualized advice

Probability Versus Expectancy Calculator

Run the numbers with your own assumptions

Compare probability, average gain, average loss, maximum gain, maximum loss, costs, and trade count so the attractive percentage gets translated into expectancy.

Public formula: Expected value = probability x average gain - failure probability x average loss - transaction costs.
Download checklist

Fast answer

A strategy with 80% probability, $50 average gain, and $250 average loss has negative expectancy before costs.

The useful question is not whether one metric looks good. It is whether the full risk, reward, cost, timing, and recovery math still make sense when the trade behaves badly.

Action checklist

  • Compare probability with average loss size.
  • Check maximum loss, not only average loss.
  • Include transaction costs.
  • Avoid treating a percentage as a full trade thesis.

Optional next step

Join the Free Options Formula Trading Lab

Get the options process in one place: structured trade ideas, research tools, calculators, education, market context, and support from traders focused on defined-risk setups.

No hype, no promises of wins, and no pretending every setup works. The free group is built to help you make every trade a clear decision instead of a reaction.

  • Defined-risk options education and structured trade ideas
  • Strike prices, expirations, suggested entries, profit targets, and exit planning
  • Market updates, practical analysis, trading research, and a live trade tracker
  • Community access to tools including Insider Edge, the Custom AI Trade Analyzer, and an advanced options calculator
Join the Free Trading Lab

Optional related resources

More Calculators and Tools

Options Profit CalculatorModel payoff and breakeven scenariosModel payoff and breakeven before sizing a new options ideaImplied Volatility Crush CalculatorEstimate volatility-crush exposureSeparate direction from volatility risk around catalystsHedge Fund Trade Logic TestPressure-test the trade planPressure-test a trade plan with transparent risk logic