All termsAdvanced Analysis and Market PositioningWorth knowing
Implied Probability Distribution
An implied probability distribution is an estimate of the distribution of future underlying prices inferred from option prices under a particular framework and set of assumptions.
Why it matters to you
Looking across many option prices can reveal more information than looking at a single implied volatility number. The resulting distribution can provide insight into how different future outcomes are being priced. But it is: model dependent and should not be treated as the market's guaranteed real world probability forecast.