What is Expected move?
Kutilgan harakat
In short
The approximate move (± %) the market expects after a report, derived from option prices. It indicates size, not direction.
Also known as: implied move
The expected move (implied move) is the approximate size of move (± %) the market expects after an earnings report or another event, derived from option prices. It shows magnitude, not direction: the stock could move that much up or down.
How it is calculated
The most common rough method uses the price of the at-the-money straddle (the sum of the call and put prices at the same strike) in the nearest expiry after the event:
Expected move ≈ (ATM call + ATM put) ÷ Stock price × 100%
Some platforms use a slightly different formula (for example about 85% of the straddle, or one based on volatility), so figures vary a little by source.
What it is for
- Risk planning: if you hold through a report, you can estimate how big tomorrow's gap might be and size your position accordingly.
- Judging the reaction: if the actual move is smaller than expected, the market "digested" the report; if much larger, there was a real surprise.
Limitations
It is the market's priced-in estimate, not a forecast. The move is commonly seen as staying inside this range about two times out of three, but sometimes it is exceeded several times over. After the report, option volatility collapses ("IV crush"), so an option buyer can lose money even when the stock moves.
The market is pricing roughly a ±6% move after the report. Over the past four reports the actual move averaged 5.75% — twice up and twice down.
Example
A hypothetical stock trades at $100 before its report. Options in the nearest expiry after the report:
- $100 strike call: $4.20
- $100 strike put: $3.80
- Straddle: $4.20 + $3.80 = $8.00
Expected move ≈ $8 ÷ $100 = ±8%, roughly a $92 – $108 range.
After the report the stock opens at $95 (−5%). That is within the expected move — not a big surprise for the market. If you held 200 shares through the report, an 8% move means ±$1,600: 200 × $100 × 8%. Check in advance whether that amount fits your risk limit.
Mistakes and tips
Before a report, size your position by the expected move, not your stop distance — a gap jumps over the stop.
Don't read the expected move as a directional signal: it only shows size.
Compare the stock's actual moves in past reports with the expected move — some stocks regularly move more or less than implied.
Frequently asked questions
- How is the expected move calculated?
- The simplest method is to add the prices of the at-the-money call and put in the nearest expiry after the event and divide by the stock price. The result is an approximate ± percentage move.
- Can a stock move more than the expected move?
- Yes, it happens often. The expected move is the market's estimate, not a limit; on unexpected news the move can be several times larger.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
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