> For the complete documentation index, see [llms.txt](https://vizo.gitbook.io/vizo-exchange-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://vizo.gitbook.io/vizo-exchange-docs/documentation/basics/images-and-media.md). # 5. Expected Move Calculation ### Overview Option Probability Distribution Algorithm: #### What is a Probability Distribution Chart? * Option probability distribution describes the likelihood of a stock price reaching a specific level at expiration. It can be used to help predict the probability of future events and formulate investment strategies. * The option strike price is displayed on the x-axis, and the probability of the option expiring at that price is displayed on the y-axis. Options with the highest expiration probability are often located in the middle of the curve, while options with the lowest expiration probability are at the two ends of the curve. *** #### How is the Probability Distribution Chart calculated? Log-Normal Distribution * The log-normal probability distribution of the option chain is calculated by taking the natural logarithm of the option prices and then plotting the resulting data. In the Black-Scholes model, the price of the underlying contract is assumed to be log-normally distributed, using constant volatility. Implied Probability Distribution of Call and Put Options * The implied distribution refers to the distribution that the market predicts the underlying contract will follow at expiration based on current option prices. The probability corresponding to each underlying contract price is determined by calculating the butterfly spread price for each strike price and then dividing it by the total value of all butterfly spreads in the entire option chain. * The implied probability distribution is an approximation and depends on market liquidity and the accuracy of option prices.\ For the calculation method of the implied probability distribution, please refer to Chapter 24 of Option Volatility and Pricing: Advanced Trading Strategies and Techniques (Second Edition). *** #### How to Use the Probability Distribution Chart? * If a trader's view on the market's implied probability is significantly different from the market's, this may present a good trading opportunity. However, if the trader's view on the probability is consistent with the market's, there is generally no need to trade. * **Reference Document Link**: * **Calculation Method Document**: Option Probability Distribution Calculation Method Document-V1.0 --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://vizo.gitbook.io/vizo-exchange-docs/documentation/basics/images-and-media.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.