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Conditional Probability

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

While event probability is essential to traders, it does not take into account related past events that may be relevant. Conditional probability is a way to estimate the likelihood of an event in the context of known information.

Using the conditional probability formula, we look at how often QQQ increases when SPY increases in a very simple example.

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