Expected move

What it is

The expected move is the range a stock is likely to stay within by an options expiration date. It is the market's own probability estimate, baked into options prices. A one-sigma range covers roughly 68% of outcomes; two sigma covers about 95%.

Two ways to calculate it

From IV: move = price × (IV / 100) × √(days / 365). For a $100 stock with 20% IV over 30 days, the expected move is about $5.73, meaning the market implies a 68% chance the stock closes between $94.27 and $105.73 at expiry.

From the ATM straddle: Add the at-the-money call price and the at-the-money put price. That total is the move the options market is charging for by expiration. It runs a little under the IV figure (about 80% of the one-sigma move), so the two methods will not match exactly.

Why it matters

Knowing the expected move helps you pick rational strike distances for spreads, straddles, and iron condors. A strike inside the expected move has real probability of being tested; a strike outside it may be safe but also cheap. Earnings traders compare the expected move to the actual overnight gap to judge whether the market was cheap or expensive going in.