Next Quarter's S&P 500 Forecast

Forecasting. No quant likes to do it. It's what stock analysts do, clever people are above that sort of thing.

In spite of (more likely due to) my IQ, here's my forecast of the S&P 500 for the next quarter.

The graph shows that there's about a 10% chance of the S&P 500 finishing above 2200 in the next quarter.

This diagram shows around a 2% chance of a drop below 1600.

These forecasts are easy to make, and backed by billions of dollars in the option's market.

Take two otherwise identical call options, which only differ in strikes.

Calculate dP/dK ('dual delta'), i.e. the difference between the price you pay for the options divided by the difference in strikes.

The result is the probability of finishing above a specified strike price (or below for puts).