SV · Statistical indicators
Expected move
Also called: implied move, options-implied move, straddle move
The expected move is the size of price change that options imply over a horizon, usually derived from implied volatility or the at-the-money straddle.
Definition
The expected move is an estimate, taken from option prices, of how far the underlying might travel by a given date. It is usually quoted as a one-standard-deviation move or as the price of the at-the-money straddle.
It describes size, not direction: the market prices the move as roughly symmetric around the forward, with skew adding some asymmetry.
Intuition
An at-the-money straddle (long a call and a put at the same strike) pays the absolute distance the price travels. Its cost is therefore the market's price for the typical absolute move until expiry. Implied volatility expresses the same thing as an annualized standard deviation that can be scaled to any horizon.
Traders compare the expected move with realized moves, with the size of planned stops and targets, and across dates to see how the market prices scheduled events.
How it's calculated
From implied volatility σ and time to expiry T in years:
1σ move ≈ S · σ · √T
From the at-the-money straddle price:
Expected absolute move ≈ StraddleATM StraddleATM ≈ √(2/π) · S σ √T ≈ 0.8 · S σ √T
The two differ by design: under a normal distribution the mean absolute move is about 0.8 standard deviations. Both are approximations that ignore rates, dividends and skew; a risk-neutral density gives the full distribution instead of one number.
Example: with the underlying at 200, implied volatility of 25% and T = 30/365, the one-sigma move is 200 × 0.25 × √(30/365) ≈ 14.3, while the straddle approximation is about 0.8 × 14.3 ≈ 11.4. Reading the straddle price as the one-sigma move would understate the range by about a fifth.
How to read it
Under a normal model, price ends inside the one-sigma range about 68% of the time. Real returns have fatter tails, so moves outside the range are more frequent than that implies, and moves well inside the range are also common.
Comparing the move implied for an expiry that contains a scheduled event with one that does not lets you estimate how much movement is priced for the event itself.
Common mistakes
- Using the straddle price and the one-sigma move interchangeably; they differ by roughly 20%.
- Using calendar days for T with an implied volatility that assumes trading days, or the reverse.
- Reading the expected move as a price target or as a ceiling.
- Ignoring skew, which makes downside and upside probabilities unequal.
In Saqrid
SV's 100 built-in proprietary formulas include expected-move and probability-cone tools, together with Hurst, entropy and momentum formulas.
Open SV.
Go deeper
Saqrid Institute lesson: Reading the RND: PDF, CDF, Expected Moves. Lesson text is open to read without an account.