Nobody knows where TSLA (at $420 today) will be next month or next year. But implied volatility tells you the plausible range of outcomes, and that range widens with the square root of time. Drag the time cursor across the chart to read the likely price range at any horizon, and drag the price line to get a rough chance the stock finishes above it.
Where TSLA could be, one year out
95% band (z=2) 68% band (z=1) Center ($420) Price line (drag)
At 180 days
Low
High
68% range
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95% range
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Rough chance above $460-
Rough chance below-
Typical swing by then 1 std-
Plain EnglishNobody knows the future price, but implied volatility tells you the plausible range, and that range widens with the square root of time. Doubling the horizon does not double the width- it grows about 1.41x. A wider cone is exactly why longer-dated and higher-volatility options cost more: you are paying for a bigger spread of outcomes.
Three things to know about the probability cone:
The range widens with the square root of time. Generally the cone at 4 months is only about twice as wide as the cone at 1 month, not four times- time buys uncertainty slowly.
It is a range, not a forecast. In practice the cone shows where price plausibly lands, roughly 68% of the time inside the darker band and 95% inside the lighter one; it never tells you the direction.
A wider cone means pricier options. As a rough guide, not a promise, higher implied volatility or a longer horizon widens the cone, and that wider spread of outcomes is what you pay for in the premium.
Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.