Published: October 2, 2025

Last Update: May 1, 2026

We introduced our Fair Value tool to you as the T-Line, based on its connection to the work of mathematician and hedge fund trader Edward Thorp.

Available to Options360 and TradeSmith Platinum accounts, our Fair Value chart visually displays the latest market price of an option against its data-driven fair value. This highlights when an option becomes statistically cheap or expensive.

While the Fair Value chart can't predict the future, it can uncover hidden opportunities to profit when market prices diverge from what the historical data, volatility, and probability suggest is the right price.

For option traders, this can help you quickly recognize opportunities to buy low (underpriced options) and sell high (overpriced options).

The Fair Value chart works well when you already have an opinion before reviewing the charts. Are you bullish, bearish, or neutral?

You can use any TradeSmith indicators, such as our Seasonality tool, Predictive Alpha projections, or our Social Heat score, which considers consumer sentiment, to formulate your bullish, bearish, or neutral opinion on the security.

You can find the Fair Value tool widget on your TradeSmith Finance Dashboard.

Image as of May 1, 2026.

The chart displays all available options, highlighting those that may be undervalued—meaning they have the potential to generate a profit, even if the stock's price doesn't move significantly.

To find these opportunities, we apply strict filters:

• It is easy to buy and sell (highly liquid),
• Expire within a set time,
• Offer a solid potential return,
• And be priced low compared to its true value.

These rules help increase the chances of success, regardless of which way the stock moves.

We also use strict filters to identify overvalued options. Options are often overpriced because traders expect the stock to move a lot (high volatility), but it usually doesn't. This kind of mispricing is common in the options market—and it's something professional traders have profited from for years.

Let's learn how to use the tool.

You can search for a security within the ticker search field.

Image as of May 1, 2026.

Below, you will see the underlying asset's ticker and company name, health status (Short-Term and Long-Term; Green, Yellow, or Red Zone), latest close price, risk (VQ%), trend (pertaining to the LT Health), and a link to view options.

Underneath, you will see a date and time stamp for the data, which you can manually refresh.

The blue line on the chart represents the theoretical fair value of the options—what the contract should be worth based on historical data, volatility, and probability models.

Image as of May 1, 2026.

You can zoom in or out on the chart to focus on a specific range of strike prices, giving you flexibility depending on how detailed you want your view to be.

Use the Expiration drop-down menu to select the contract timeline that fits your trading strategy.

Finally, toggle between the Calls and Puts buttons to match your market outlook—Calls if you're bullish, Puts if you're bearish.

The chart above shows Palantir Technologies Inc (PLTR) call options that expire on May 1, 2025. Most of these options are shown as green dots, indicating they're slightly undervalued compared to their fair value. Red dots indicate that the options are slightly overvalued compared to their fair value.

It's essential to remember that markets are generally efficient—meaning prices tend to remain close to their fair value. However, small mispricings do happen, and that's where opportunity lies.

In this case, several out-of-the-money call options appear relatively undervalued. If you're bullish on PLTR (expecting the stock to rise), these options may offer returns that exceed expectations as their prices approach fair value over time

If you're bullish, you can also profit from the expected price move by selling a put.

Image as of May 1, 2026.

To the right of the chart, you will see information on how to follow the best strategy:

You can also find the Fair Value chart when you search for a ticker on the upper right of your program site.

Go to the Options tab from the Asset Details page and select the Fair Value button.

Image as of May 1, 2026.

If you're bullish on stock XYZ, head over to the Fair Value chart to see if any undervalued call options stand out as potential trades.

If you're bearish on stock XYZ, head over to the Fair Value chart to see if any overvalued put options stand out as potential trades.

The Fair Value chart can also help evaluate earnings trades by showing option price patterns - typically, calls and puts are overvalued before earnings announcements.

Even a small pricing edge—just a few pennies—can make a difference when you're using a strategy built on statistical advantages. In options trading, those pennies add up over time.

Note: If you see a star instead of a green or red dot, this indicates that it's the largest outlier from the calculated fair value.

Fair Value: Key Concepts for Traders

Start with a Strategic Opinion

Before scanning for trades, begin with a well-informed market opinion. This can be based on factors such as:

• Seasonality trends
• Predictive Alpha signals
• Social heat scores
• Other relevant indicators
  

This approach helps narrow your focus and align trades with broader market insights.

Fair Value Charts Are Not Predictive Tools

Most charts, including fair value charts, are not designed to signal trading opportunities directly. Instead, they often reflect random price movements or fairly valued options—both of which are typical in normal market conditions.

Market Environment Drives Opportunity
The number and quality of trading opportunities are heavily influenced by the broader market environment. In some conditions, viable trades may be scarce, while in others, dozens of potential setups may emerge.

Understanding Fair Value Signals
Fair value charts help identify whether an option is:

• Fairly valued – the most common scenario, indicating no immediate action.
• Undervalued – potential buying opportunities.
• Overvalued – potential selling opportunities.

Act on Current Data, Not Future Expectations

Options prices can shift rapidly throughout the day. Always base your decisions on the current chart data, and avoid assuming that pricing conditions will remain stable in the future.

Need Help? 

Our Customer Success team is ready to assist: 

• Phone: 1-866-385-2076 (toll-free) 
• Email: [email protected] 

*Note—The tabs and features you see on your TradeSmith Finance site will vary based on your subscription(s) and subscription level(s).