Volatility
Expected Move
Also called: implied move, one standard deviation move
The expected move is the range an underlying is priced to stay within by a given expiration, typically one standard deviation (about 68% probability), derived from implied volatility or from the price of the at-the-money straddle.
The two common estimates agree closely. From IV: multiply the stock price by IV and by the square root of time to expiration in years. From the market directly: the at-the-money straddle price, or roughly 85% of it for a one-standard-deviation estimate, since a straddle's price already encodes the market's whole distribution for that expiry.
Expected move frames strike selection. Selling strikes outside the expected move targets roughly a one-in-three chance of the strike being breached at expiration; earnings trades compare the implied move with the stock's historical earnings moves to judge whether options are rich or cheap.
Formula
Expected move (1σ) ≈ Price × IV × √(DTE / 365) ≈ 0.85 × ATM straddle price
Example
With SPY at $500 and 30-day IV at 15%, the one-standard-deviation expected move is about $500 × 0.15 × √(30 / 365) ≈ $21.50, a range of roughly $478.50 to $521.50.
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Frequently asked questions
Does the expected move mean the stock will move that much?
No. It is a one-standard-deviation range: the market prices roughly a 68% chance the stock finishes inside it and a 32% chance it finishes outside. Two standard deviations cover about 95%.
How do I calculate the expected move for earnings?
Use the straddle expiring just after the report; its price isolates the move priced for the event. Compare it with the stock's actual moves on past earnings days to judge whether the options are rich or cheap.