A multistep binomial tree is an option pricing tool used to figure out the value of American-style stock options and American-style futures options when the underlying price movements occur by more than one step . This methodology begins with calculating the probability of an up movement in the stock price/ futures price as follows:

Where: 1- d is the percentage decrease when there is a down movement, u is the up movements in underlying price, d is the down movements in underlying price. u defines up movements in the futures price as follows:

σ is the volatility of the futures price and Δt is the length of one time step.