Trading term

What is Expected move?

The expected move is how far the options market thinks a stock will move by a given date, up or down. Before earnings it's often read off the price of a straddle.

Options prices carry a view on how much a stock will move. The quick way to read it is the at-the-money straddle: a call and a put at the strike closest to the stock price. Divide the straddle's price by the stock price and you get the expected move, in either direction.

Brokers often show it before earnings. It's not a forecast of direction, and the stock can move more or less. It's the size of the move the options are priced for.

For example

If a $100 stock's straddle expiring the day after earnings costs $5, the expected move is about 5%, so roughly $95 to $105.

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Why it matters to you

To make money buying options on an event, the stock has to move more than the expected move. In a test of 315 earnings reports since 2011, it did so on about 39% of them.

⚠ Reading it as a range price stays in

The expected move is an average size, not a fence. Stocks move further than it fairly often, and a few moves are many times bigger.

Frequently asked questions

How do you calculate the expected move?

Take the price of the at-the-money straddle that expires just after the date you care about, and divide it by the stock price. That gives the move as a percentage, up or down.

Is the expected move the same as implied volatility?

They're linked. Implied volatility is a yearly number. The expected move turns it into a size of move for a specific date, in dollars or percent.

Read the full guide

DerivativesDoes Buying Options Before Earnings Make Money? 315 Reports, TestedWe tested 315 earnings reports since 2011. Stocks beat the options' expected move 39% of the time and 61% of straddles lost. Here's the IV crush.9 min read

Related terms

0DTE options0DTE stands for zero days to expiration: an option that expires on the same day it's traded. S&P 500 index options now expire every weekday, so there's a 0DTE contract every trading day, and they make up most of all S&P 500 options volume.Call optionA call option is a contract giving the buyer the right — but not the obligation — to buy an asset at a fixed 'strike' price before a set expiry date. Call buyers are betting the price will rise; their risk is capped at the premium paid, while the potential profit is open-ended.Cash-secured putA cash-secured put is an options strategy where you sell a put option while setting aside enough cash to buy the stock if you're assigned. You collect the premium as income; in exchange, you agree to buy the stock at the strike if it falls there. It's a way to get paid to buy a stock you want at a lower price.Covered callA covered call is an options strategy where you own 100 shares of a stock and sell a call option against them. You collect the premium as income; in exchange, you cap your upside at the strike. It's a popular way to generate income on shares you're happy to hold or sell.
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