Delta as a probability
Definition · Level 3 · Spreads & short options
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Rule of thumb: an option’s delta, ignoring the sign, roughly equals the market-implied chance it finishes in the money. Only approximate: under Black–Scholes a put’s true ITM odds are a bit higher, a call’s a bit lower.
Example
30-day 20-delta put at 25% IV → about 22% ITM, so roughly 78% it expires worthless.
Where Tradecraft teaches it
Level 3 · Spreads & short options, in the lesson “Probability vs payoff, condors & managing trades”: Breakeven win rate, delta as odds, the short iron condor, and when to take profits or cut losses.
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