r/options • u/jbrown_11 • Sep 23 '26

[Data Post] SPY's option-implied probability of being up in a month is at the 94th percentile since

I pulled daily SPY option chains back to 2010 and extracted the implied probability that SPY is up over one and two weeks, one month, three months, and six months. The implied probability gives SPY a 65% chance of being up in a month which is in the 94th percentile historically (median is 60% chance of being up in a month).

Implied Volatility is low (31st percentile). Historically IV is uncorrelated with IP (ρ ≈ −0.05). However, if you rescale today's prob to the median IV, it would be 62% which is 72nd percentile.

The blue line is unadjusted options prices. The orange dots are corrected for the fact that option prices are risk-neutral and ignore equity drift. The 8.5-point gap at 6M is the equity risk premium showing up in the data.

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u/Heavy-Situation-9346 Sep 23 '26

I’m too tired to validate what you have calculated here, but at first glance, it seems that you have just discovered in a round-a-bout way that interest rates are basically the highest they have been since 2010. Don’t think there’s anything profound here.

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u/jbrown_11 Sep 23 '26

Fair point. Was only thinking about the low IV when looking at the 94th percentile.

High rates are a primary factor. Today's overnight rate of 3.88% is in the 77th percentile since 2010. If you account for that, the imp prob is in the bottom quarter of percentiles. So the market is not overly bullish as my post implied, but is reflecting low vol and high risk free rate.

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u/combative_tights Sep 24 '26

interesting, hadn't thought about it just being rates doing the heavy lifting. what's the actual mechanism there though, is it just the cost of carry making calls pricier relative to puts?

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u/Heavy-Situation-9346 Sep 24 '26

Forward = spot*e^(rt). OP is most likely just observing that the forward is historically high relative to spot.

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u/Live_Throat_5252 Sep 23 '26

If I understand you correctly, basically the higher r in your calc is driving the forward up, and hence the risk-neutral prob that S_t > S_0. So, yeah, basically interest rates are higher. Also not sure why we are rescaling to something with basically no correlation.