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Math Help - Finding stock market index trend based on option analysis

  1. #1
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    Unhappy Finding stock market index trend based on option analysis

    Let us assume that spot value of stock market index is 5670. Out of money call option for the strike price 5800 is trading at $8.15. Out of money put option for the strike price 5600 is trading at $24.How to calculate probability of stock market index going up or down?
    Last edited by Vinod; October 17th 2012 at 05:44 AM.
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    Re: Finding stock market index trend based on option analysis

    Hi,
    When I entered these values in my index trend finder widget, it gave me answer as follows:
    Probability of going up is 42.26% and probability of going down is 57.75%


    Are these both the answers correct? And if correct can any member of this forum explain me a little bit logic behind it?
    Thanks.
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  3. #3
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    Re: Finding stock market index trend based on option analysis

    Hi,
    When I calculated it manually, my answer for probability of index going up is 40.35% and going down is 59.65% Why there is a difference between my answer and index trend calculator's answer.
    Any reply from any member of this forum pertaining to this topic is appreciated.
    Okay,
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