IB Communiqué - November 8, 2013

Interactive Brokers - IB Communique
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Probability Lab
This month, with great anticipation, we are introducing the first of several editions of our Probability Lab℠ (Patent Pending). Probability Lab encompasses the basic understanding and approach with which I began my career in the option business over 40 years ago. In those early days you could only buy or sell options in the OTC markets, and as I started thinking about how to price them, one day a light bulb went on in my head. Soon thereafter I started Timber Hill, our option market-making firm.

In subsequent years much academic and technological focus came to this field bringing many refinements at the edges, but from the practical point of view of a trader, not much has changed. The basic elements of my approach are spelled out in a letter at interactivebrokers.com/probabilities

My hope is that many of our customers will see these ideas as common sense. You will use the Probability Lab to experiment with the shape of Probability Distributions and study the combination trades with the highest Sharpe ratio. (The ratio of expected profit to the variability of outcome).

Increasing our customers' profitability remains our ultimate objective. I hope this tool will help.

Open the Probability Lab using the New Window dropdown from within Mosaic, or the Trading Tools menu from
within TWS (version 942).

Thomas Peterffy
Thomas Peterffy Signature
Interactive Brokers

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Probability LabSM (Patent Pending). Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations. Supporting documentation for any claims and statistical information will be provided upon request. Options involve risk and are not suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy visit Interactivebrokers.com/disclosures or call 203-618-5800.

No offer or solicitation to buy or sell securities or investment products of any kind, and no recommendation or advice is made, given or in any manner endorsed by Interactive Brokers LLC ("Interactive Brokers") or any of its affiliates.

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