Probability of profit against probability of touch
Probability of profit is the chance your short option finishes out of the money and you keep the whole credit. Probability of touch is the chance the stock trades through your strike at any point before then, even for a minute, before falling back. The second is roughly twice the first, and it is the one you will actually feel.
Both numbers are true. They answer different questions, and confusing them is why people close winning trades at a loss.
The position
CSCO is $58.40 on March 3. You are short one April 17 $64 call against 100 shares, sold for $0.62 with 45 days to run, at 28 percent implied volatility.
Two probabilities fall out of that.
- Probability of profit: 82.3 percent. The model says CSCO finishes below $64 on April 17 with that likelihood, in which case the call dies and the $62 is yours.
- Probability of touch: 35.3 percent. The model says CSCO prints $64 or better at some point in those 45 days with that likelihood, whatever it does afterwards.
So the trade that wins five times out of six will scare you one time in three.
The ladder
Run it across the whole in-band section of the chain.
| Strike | Delta | Keep the credit | Touched before expiry | Touch divided by finish |
|---|---|---|---|---|
| $60 | 0.431 | 60.7% | 78.4% | 2.00 |
| $61 | 0.366 | 67.0% | 65.9% | 2.00 |
| $62 | 0.306 | 72.7% | 54.4% | 2.00 |
| $63 | 0.252 | 77.9% | 44.2% | 2.00 |
| $64 | 0.203 | 82.3% | 35.3% | 2.00 |
| $65 | 0.162 | 86.1% | 27.7% | 2.00 |
| $66 | 0.127 | 89.3% | 21.4% | 2.00 |
| $68 | 0.074 | 93.9% | 12.2% | 2.00 |
Look at that last column. Eight strikes, and the ratio prints 2.00 every time.
Why it is exactly two
Most articles call this a rule of thumb. It is not a rule of thumb. It falls out of the reflection principle, and the argument fits in a paragraph.
Take every price path that touches $64 at some point. At the moment it touches, the stock is sitting exactly on the strike, and from there the remaining path is symmetric: it is as likely to drift up as down, because a random walk with no drift has no opinion about direction. So half the paths that touch $64 finish above it and half finish below. Every path that finishes above $64 must have touched $64 on the way. Half of touchers finish in the money, therefore touchers are twice finishers.
The only thing that breaks the symmetry is drift. At 4.2 percent interest and 28 percent volatility the risk-neutral log drift on this stock is 0.28 percent a year, which over 45 days is nothing at all. Hence 2.00 to two decimal places rather than 1.97 or 2.04.
Push the volatility to 60 percent or the horizon to two years and the ratio does move. On any normal monthly premium trade, doubling is not an approximation. It is the answer.
Which number is for what
Keep-odds tell you about the money. How often the position pays what it promised, what to expect across many trades, whether the strike is far enough out. It is the number that belongs in any return calculation.
Touch-odds tell you about the experience. How often you will open the app and find the position underwater, how often the roll question comes up, how often you will be tempted to do something. It is the number that predicts your behaviour.
Every seller who quits after four months quits because of the second number while quoting the first. They read 82 percent, sold six positions, watched two of them go through the strike in week three, and concluded the probability was a lie. It was not. Two touches out of six against a 35 percent touch rate is dead centre.
What touch does not tell you
Whether it comes back.
This is the limit of the number and it is a hard one. Touch-odds count the paths that reach $64. They say nothing about what those paths do afterwards, and the model's answer, that half of them fall back, is an answer about a frictionless random walk rather than about Cisco. A stock that gaps through your strike on an acquisition rumour has touched, and it is not coming back, and the 50 percent figure was never a claim that it would.
So do not use touch-odds as a comfort. A 35 percent touch rate means one trade in three gives you a decision to make, not that two thirds of the trouble resolves itself.
Using it before you sell rather than after
Pick the strike with keep-odds. Then look at the touch number and ask whether you can live with it.
The $64 strike pays $62 and touches 35 percent of the time. The $66 strike pays $35 and touches 21 percent of the time. That is 44 percent less income to cut a bit over a third off the number of uncomfortable weeks. Whether that trade is worth making depends on something no model prices, which is whether the discomfort makes you close positions early. If it does, the more expensive strike is cheaper.
Both numbers come out of the same model as the delta you are already reading off the chain, and delta is a third number again, close to the keep-odds but not equal to it.
OptionsKing scores every candidate strike on a deterministic 0 to 100 scale, blends that score with the return on the capital the trade ties up, and shows you the highest-ranked handful. There is no minimum score. How it works covers what the ranking does and does not tell you.
Questions people actually ask
What is probability of touch?
The chance the underlying trades at or through your strike at any point before expiration, regardless of where it settles. A short call can be touched in week two, fall back, and still expire worthless.
Why is probability of touch double the probability of finishing in the money?
Because of path symmetry. A stock sitting exactly on your strike is equally likely to finish above or below it, so half of the paths that touch end up in the money. Every path that finishes in the money touched on the way. Touchers are therefore twice finishers, near enough exactly when drift is small.
Which probability should I use to pick a strike?
Keep-odds for the money and touch-odds for the temperament. Keep-odds belong in your return expectations. Touch-odds tell you how often the position will look like it is losing, which is what actually decides whether you stick with the strategy.
Does a touch mean I will be assigned?
No. Early assignment on an out-of-the-money-turned-barely-in-the-money call is rare, because exercising early throws away the contract remaining time value. A touch is a price event, not a settlement event.
Sources
Rules and thresholds above were checked against these documents on August 4, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.
Keep reading
Do the math on your own trade
Every price in this article is an illustrative worked example, not a quote. Read Screening and probability for the rest of the series, and the disclaimer before you act on any of it. Selling options carries real risk of loss, and the loss can be far larger than the premium you collected.