Probability of profit (POP) is the single most important number to understand before selling a credit spread. It tells you how often you should expect to win, and it directly informs your position sizing and strike selection.

The Quick Calculation

Probability of profit ≈ 100% - |short strike delta|

If your short put has a delta of -0.25 (25-delta), your POP is roughly 75%. That means in about 75 out of 100 trades, the stock will be above your short strike at expiration.

But that's the probability of ANY profit. The true breakeven probability accounts for the credit you received.

The More Accurate Calculation

True POP = probability that the stock stays above (short strike - credit received) for put spreads

Example: You sell a $185/$180 bull put spread on AAPL for $1.30 credit.

  • Short strike: $185
  • Breakeven: $183.70 ($185 - $1.30)
  • The probability of AAPL being above $183.70 at expiration is your true POP

    • This number is slightly higher than the delta-based estimate because your breakeven is lower than your short strike.

    POP vs Delta: Why They Differ

    Delta is a rough proxy for probability, but it's not exact. Here's why:

  • Delta measures the option's sensitivity to price changes, not pure probability
  • Delta uses a risk-neutral probability measure, not real-world probability
  • Stocks have a slight upward drift (equity risk premium) that delta doesn't fully capture

    • In practice, for short-term options (30-45 DTE), delta is close enough. For longer-term options, the drift matters more.

    What POP to Target

    | POP Range | Risk/Reward | Best For | 85-90%Low credit, very wide stopsConservative traders, larger accounts 75-80%Balanced credit and riskMost traders, sweet spot for income 65-70%Higher credit, more losersAggressive traders, smaller accounts | Below 65% | High credit, frequent losses | Not recommended for credit spreads |

    The 75-80% range (20-25 delta short strike) is where most professional spread sellers operate. You win often enough to compound, and the credits are large enough to overcome commissions and the occasional loss.

    Why High POP Isn't Always Better

    Selling a 10-delta spread (90% POP) sounds great until you look at the numbers:

  • 10-delta spread: $0.40 credit on $5 width. Win 90% = 90 × $40 = $3,600. Lose 10% = 10 × $460 = $4,600. Net: -$1,000
  • 25-delta spread: $1.30 credit on $5 width. Win 75% = 75 × $130 = $9,750. Lose 25% = 25 × $370 = $9,250. Net: +$500

    • The 25-delta spread actually makes money over 100 trades while the "safer" 10-delta spread loses. This is because the risk-reward on very far OTM spreads is terrible.

    How to Use POP in Practice

    Step 1: Decide your target POP range (75-80% for most traders).

    Step 2: Find the strike with that delta on your target stock and expiration.

    Step 3: Check that the credit is at least 25-30% of the spread width. If it's not, the risk-reward doesn't work even at high POP.

    Step 4: Verify no earnings or major events fall within your expiration window.

    Step 5: Size your position based on max loss, not credit received. Risk no more than 3-5% of your account per trade.

    Tracking Your Actual Win Rate

    Theoretical POP is one thing. Your actual results might differ because of:

  • Management decisions (closing early, rolling)
  • Market regime (bull markets inflate put spread POP)
  • Stock selection bias

    • OptionsPilot tracks your actual win rate across all credit spread trades, so you can compare your real performance to the theoretical probabilities and identify where your strategy diverges.

    The goal isn't to win every trade. It's to win at a rate that, combined with your average win and average loss, produces consistent positive expectancy over time.