Expectancy is the average outcome of one trade, worked out from how often you win, how much you win, and how much you lose when you don’t.
Sell the 95 put, buy the 90, 45 days out. Credit $93, maximum loss $407. Assume for a moment it is held to expiry and every loss is the full one.
| If it wins this often | Expectancy per trade | Meaning |
|---|---|---|
| 95% | +$68 | Comfortably profitable |
| 85% | +$18 | Profitable, and thinner than it looks |
| 81.4% | $0 | The breakeven point |
| 75% | −$32 | Losing money while winning three trades in four |
Those win rates are assumed, to show the arithmetic. They are not measurements — no test on this site has published a result. The dollar figures are arithmetic from the specification above.
On a defined-risk credit spread the breakeven win rate is the maximum loss divided by the width. Nothing else.
Yes, that is exactly what it is. The word is used to signal that it is worked out from the win rate and the average sizes rather than just totalled up.
Positive, after costs, on data the strategy was not chosen on, over enough trades that the losses have actually shown up. A number without those four conditions is not comparable with anything.
Easily. If it takes a $10,000 buying-power reduction to earn $18 a trade, or the worst drawdown is more than you would sit through, the arithmetic is fine and the trade is not.
Because win rate is easier to say and sounds better. A 90% win rate is a good headline; the expectancy behind it is often not.
Every verdict on this site is decided on expectancy per trade, and none has been published yet.
When one is, the win rate will be printed beside it — not because it decides anything, but because seeing the two together is how the point lands.
