Monte Carlo Simulation
A method that runs many random price paths to estimate the probability distribution of where price might end up.
Monte Carlo simulation is a way to forecast uncertain outcomes by generating thousands of random scenarios and looking at the distribution of results.
In GammaFlip, each path is a discretized random walk:
- Seeded with current spot and ATM implied volatility.
- Local volatility is warped by the current GEX surface — positive-gamma zones compress moves, negative-gamma zones amplify them.
- 20,000 paths are run to the chosen horizon, then summarized as percentiles and a terminal density.
Monte Carlo gives you probabilities, not predictions. It's most useful as an answer to questions like “what's the chance price ends above $X by Friday?” rather than “where will price be on Friday?”
See also: Monte Carlo Simulator, Percentile (p10 / p50 / p90), Sigma (σ), Skew (distribution)