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Probability of profit vs expected value: how can you win 85% and still lose?

Probability of profit tells you how often a trade wins. Expected value tells you what it makes on average, once the losses are counted. A trade can win most of the time and still lose money, so check expected value before you trust a high win rate.

Comparison · 7-minute read · Updated 2026-11-09

The short answer

Probability of profit (POP) is how often a trade makes money. A short put with an 85% POP wins about 85 times in 100.

Expected value (EV) is how much you make or lose on average per trade, after the wins and losses are added up. It's the number that tells you if a strategy pays over time.

Option sellers live with high POP. They collect a small premium most of the time and take a bigger loss now and then. That can work. But if the losses are big enough, an 85% win rate still loses money. Win rate alone never tells you if a trade is good.

Side by side

Twenty short puts, one losing average (hypothetical)

Oakmont Paper, a made-up stock, trades at $50. You sell the $45 put for $1.00, so $100, every month. Your break-even is $44.

Here's a 20-trade record:

How a loss row works, at $37: you buy 100 shares at $45, worth $37. That's −$800, plus your $100 premium, for −$700.

You won 17 of 20, an 85% win rate. You lost $400 overall. That's an expected value of −$20 per trade.

The three losses averaged $700 each. One average loss wiped out seven wins. Three of them wiped out all seventeen and then some.

The break-even win rate

There's a quick way to see this coming. The win rate you need just to break even is:

average loss ÷ (average win + average loss)

Here: $700 ÷ ($100 + $700) = 87.5%. You won 85%. Short of break-even, so the strategy lost money even though it "worked" most of the time.

The expectancy calculator does this on your own numbers.

Same strike, a higher premium

Now say IV was higher when you sold, and the same $45 put paid $1.50. Same stock, same 20 outcomes:

Same 85% win rate. Now the record is +$600, or +$30 per trade. The break-even win rate drops to $650 ÷ ($150 + $650) = 81.25%, and 85% clears it.

Nothing about how often you won changed. Only how much you were paid for the risk changed. That's the whole difference between POP and EV.

One caution: in a real market, a richer premium usually means the market expects bigger moves. So the losses can be bigger too. The tally holds the outcomes still to show the math, not to promise that higher IV is free.

What this means for a seller

• A high POP is the starting point, not the verdict. Platforms often show POP. Almost none show EV.
• Know your average loss. Keep a journal of every assigned put and what it cost. That one number decides if your win rate is enough.
• Selling far out of the money raises POP and shrinks the premium. If losses don't shrink as fast, EV gets worse, not better.
• Cut the big losses. Three bad trades did all the damage above. A plan for a falling stock matters more than squeezing out a 90% win rate.

Delta vs probability of profit shows where POP comes from. Probability of touch vs probability ITM shows how often your strike gets tested on the way. In the wheel strategy, an assigned put isn't the end, but the shares still carry that loss until they recover. For where short puts sit next to other strategies, see the options strategy comparison chart.

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