Probability of Touching

Probability of touching is an options-pricing estimate of how likely it is that a stock's price will hit a specific level at some point before an option expires, not just where it ends up on the final day. It is usually quoted as a percentage and shown alongside an option's strike price on many broker platforms.

The number comes from an options pricing model, typically the same kind of model used to calculate an option's theoretical value and its "Greeks." The model looks at the current stock price, the strike price in question, the time remaining until expiration, and implied volatility (the market's expectation of how much the stock will swing around). From those inputs it estimates the odds that the price path wanders far enough to touch that strike at any moment along the way, then settles back or keeps going.

The nuance that trips people up is the difference between "touching" and "expiring there." A stock can touch a strike price on day three of a thirty-day option and then drift back to its starting point by expiration. Probability of touching counts that as a hit. Probability of expiring (sometimes called probability of expiring in-the-money) only counts where the price actually lands on the last day. Because there are many more ways to touch a level temporarily than to end up exactly past it at expiration, probability of touching is mathematically always the higher of the two figures for the same strike.

It's also worth remembering this is a model output, not a guarantee. It assumes a particular pattern of random price movement and a volatility estimate that can change. If actual volatility differs from what was priced in, the real chance of touching that level shifts too.