Every number OptionProfit shows you — P&L, Greeks, probability of profit, breakevens — comes from a specific calculation. This page explains the model, the inputs, and why we made the choices we did.
Black-Scholes is the industry-standard model for pricing options. It takes five inputs — current stock price, strike price, time to expiration, implied volatility, and the risk-free interest rate — and returns the theoretical fair value of a call or put.
It also produces the Greeks directly from the same calculation: Delta, Gamma, Theta, Vega, and Rho all fall out of the Black-Scholes formula as partial derivatives. One model, one set of consistent outputs.
We chose Black-Scholes because it is transparent, well-understood by professional traders, and computationally exact. It is what your broker uses to mark your positions. It is what market makers use to quote premiums. If your numbers should agree with anyone's, it makes sense they agree with the model the entire market is priced on.
Black-Scholes is only as accurate as its inputs. The input that changes the most — and that static calculators almost always get wrong — is implied volatility.
Most free options calculators ask you to type in an IV number yourself. That number is stale the moment you look it up. IV shifts continuously throughout the trading day, spikes into earnings, and collapses after them. A calculator using yesterday's IV for a position you're entering today is giving you materially wrong numbers for your P&L curve, your Greeks, and your probability of profit.
OptionProfit pulls implied volatility directly from the live options chain for each specific strike and expiry you select. You are not working with an average or a substitute — you are working with the IV the market is pricing that exact contract at, right now.
The same applies to the premium itself. We display the mid-price (midpoint of bid and ask) by default, with an option to switch to bid/ask worst-case fill so you can see the realistic cost of entering and exiting.
Black-Scholes requires a risk-free interest rate as one of its inputs. We source this from the current US Treasury yield — the same benchmark the derivatives market uses. It is fetched automatically each session and applied across all calculations, so you are never working with a hardcoded rate that drifts out of date as the Fed moves rates.
Stock quotes, options chain data, bid/ask spreads, and Greeks are sourced from a live market data feed during trading hours. Outside market hours, the most recent available data is used. We do not interpolate or estimate market prices — if the data is not available for a given strike, it is not shown.
OptionProfit calculates probability of profit three ways and displays all three so you can see how they compare:
For single-leg positions, the absolute value of delta is a direct approximation of the probability the option expires in-the-money. Fast, widely used, and reasonable for simple strategies.
Using the Black-Scholes framework, we model the expected distribution of stock prices at expiry and calculate the probability the stock closes on the profitable side of the breakeven. More precise than delta for spread strategies.
For credit spreads, the net credit received as a percentage of the spread width gives an implied probability of the spread expiring worthless — a useful reality check directly from what the market is pricing.
These are statistical estimates based on current market conditions, not predictions. They tell you the mathematical odds implied by current pricing — what actually happens is up to the market.
Black-Scholes assumes constant volatility and log-normally distributed returns. In practice, volatility has a surface — IV varies by strike and expiry (the volatility skew) — and markets have fat tails. For most planning purposes these assumptions hold well enough. For deep out-of-the-money options, short-dated positions into binary events like earnings, or extreme strike distances, treat the outputs as directional estimates rather than precise figures.
OptionProfit is a planning and analysis tool. It is not a broker, it does not execute trades, and nothing here is financial advice.
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