Expected move

The size of the move the options market implies before an event, from implied volatility — roughly the at-the-money straddle price.

The expected move is the size of the price swing the options market is pricing in for a stock over a given period, usually until the next expiration or through an earnings report. It comes straight from implied volatility, so it reflects how much movement traders are collectively paying for, not a prediction of direction. A quick approximation is the price of the at-the-money straddle: add the call and put premium at the strike nearest the current price, and that dollar figure is roughly the one-standard-deviation move up or down.

In practice traders use it to sanity-check a trade. If a stock sits at 100 and the expected move before earnings is about 8, you know the market already expects it to land somewhere between 92 and 108 roughly two times out of three. That tells you whether the strikes you are selling are inside or outside the anticipated range, and whether a directional bet needs a move bigger than what is already priced in to pay off.

The common mistake is treating the expected move as a ceiling. It is one standard deviation, so the stock finishes outside that band around a third of the time, and big surprises land well beyond it. It also says nothing about direction, and after the event implied volatility usually collapses, which is exactly why so many long options bought into earnings lose money even when the stock moves.

← Back to the glossary · Guides · Strategies

All options terms

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.