Interactive Brokers (IBKR) unveiled a brand new trading tool inside the Trader Workstation called Probability Lab. What exactly is the Probability Lab? According to the online broker, it is a tool to help investors think about options in a practical way without complicated mathematics.
Options are typically a fairly complicated investment asset, and Interactive Brokers Founder Thomas Peterffy set out to make it more practical with the Probability Lab. Peterffy has spent a lot of time in the options world, and his goal with this project was to allow Interactive Brokers customers to see the basic ideas behind options trading.
Peterffy put together a letter, which is one the Interactive Brokers site, explaining several different concepts and how they molded the Probability Lab. The letter touches on the following topics:
-The nature of stock prices
-Calculating Probability Distribution from Option Prices and Vice-Versa
-Probability Distribution Implied by Market and Your Own Opinion
-The Best Trades and Potential Consequences
To view this informative letter simply click here.
Note that this is the first edition of what will be several editions of the Probability Lab. Interactive Brokers is also allowing its users to fill out a brief survey and then take a test to demonstrate skill in the options world. The first place winner will win $10,000 in cash, while second will win $5,000. There are five third-place prizes of $1,000 each.
Peterffy introduced the Probability Lab with a brief video on YouTube, which can be seen below.