Calculator · Earnings

Expected move calculator

Enter the stock price, the implied volatility and the days until expiration to see the one standard deviation move the options market is pricing. Add the at-the-money straddle price to compare it with the quick straddle read traders use around earnings.

Your numbers

Call premium plus put premium at the strike nearest the stock.

Expected move

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As a percent

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Range

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Straddle read

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The working

    The formula

    Implied volatility is quoted as an annual figure. To scale it to the time you care about, multiply by the square root of the fraction of a year left: days to expiration divided by 365. Multiply that by the stock price and you have the move, in dollars, that one standard deviation represents. A $100 stock with an implied volatility of 40% and 30 days to go works out to about $11.47 either way.

    The straddle read is simpler. Add the price of the at-the-money call and put for the same expiration; that total is roughly what the market expects the stock to move by then. Around an earnings report it is the quickest way to see what is priced in, which is the point argued in the options market has already priced the earnings move.

    Reading the result

    The expected move measures size and says nothing about direction. It is most useful as a comparison: against the move you think the news deserves, against how far the stock has moved on past reports, and against the stop on a position you are thinking of holding through the date. The expected move entry in the glossary covers the statistics behind it.

    For the calendar side of an earnings trade, see how to read an earnings calendar, and before holding a swing position through a report, plan the trade around the date.

    Questions about this calculator

    Which implied volatility should I enter?

    The implied volatility of the at-the-money options for the expiration you care about. Before earnings, that is the first expiration after the report date. Most option chains show IV per strike; use the one nearest the stock price.

    Why do the two methods give different answers?

    The formula gives one standard deviation of the distribution the option prices imply. An at-the-money straddle is priced a little below that figure, so the straddle method usually comes out somewhat smaller. Both are estimates of size, and neither says which way the stock will go.

    Does the stock stay inside the range?

    Often, not always. Under a normal curve about two thirds of outcomes land inside one standard deviation, but real returns have fatter tails, so moves outside the range happen more often than the curve suggests.

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