# Expected Move Also known as: implied move, 1SD move, straddle-implied move. A Volatility reference entry (Volatility estimators) in the LuxAlgo Library: explained, not implemented as a chart indicator. ## What is the expected move? The expected move is the plus-or-minus price range the options market is pricing for an underlying between now and a given expiration, usually quoted as a one-standard-deviation move. It comes from one of two standard calculations: the price of the at-the-money straddle for that expiry, or [implied volatility](https://www.luxalgo.com/library/concept/implied-volatility/) scaled to the time remaining by the square root of time. Drawn on a chart it becomes a pair of levels around the current price that, under the options model's own assumptions, contain the expiry price about two times in three. The two forms are close relatives, not the same number. A straddle (the at-the-money call plus the at-the-money put) costs roughly the average absolute move to expiry, which under Black-Scholes assumptions is about 0.8 of one standard deviation, so brokers that quote the straddle, or a fraction of it, as the expected move show a narrower figure than the implied-volatility formula. Both scale with time the same way: quadrupling the days to expiry only doubles the move. Two cautions apply. The probabilities are risk-neutral: they come from prices that include a premium for insurance, and index options have historically tended to price more movement than then arrived (the variance risk premium), so the band is not a calibrated forecast. And real returns have fatter tails than the lognormal model behind the 68 percent label, so moves of two or three expected moves happen more often than the model implies. ## Why there's no indicator for this An expected move cannot be computed from the price chart, because its inputs are not on it. The straddle price, the implied volatility for a specific expiry, and the expiry calendar all come from the options market; a chart's open, high, low, close and volume carry none of them. A script that projects a range from past price movement is drawing [probability cones](https://www.luxalgo.com/library/concept/probability-cones/) from realized volatility, a different, backward-looking quantity. The nearest a chart gets is to read a published volatility index as a data series, such as the [VIX](https://www.luxalgo.com/library/concept/vix/) for the S&P 500, and apply the square-root-of-time formula; LuxAlgo's Implied Volatility indicator reports a one-standard-deviation move this way. That is a fixed-horizon proxy from a 30-day index, not the move priced to a particular expiry, and most individual symbols have no such index. The true per-expiry figure lives in the option chain. ## How it's calculated Two standard forms: the at-the-money straddle for the target expiry, and implied volatility scaled to that expiry by the square root of time. ``` EM_straddle ≈ C_ATM + P_ATM EM_IV = S × IV × sqrt(D / 365) Levels: S + EM and S - EM C_ATM + P_ATM ≈ sqrt(2 / π) × S × IV × sqrt(T) ≈ 0.8 × EM_IV S: current price of the underlying C_ATM, P_ATM: prices of the at-the-money call and put for the chosen expiry EM_straddle: expected move read from the straddle, in price units IV: implied volatility for the chosen expiry, annualized, as a decimal (25% = 0.25) D: calendar days to expiry T: time to expiry in years (D / 365) EM_IV: one-standard-deviation expected move from implied volatility, in price units EM: whichever expected move is being drawn π: pi, about 3.1416 ``` The straddle approximates the average absolute move to expiry; dividing it by about 0.8 converts it to a one-standard-deviation move. Some brokers quote the straddle, or about 85 percent of it, directly. Under a lognormal model the one-standard-deviation band holds the expiry price about 68 percent of the time; twice EM_IV gives roughly a 95 percent band. Some desks count trading days instead, IV × sqrt(N / 252) with N trading days to expiry. The figures differ slightly, so keep one convention. ## How traders use it - Event framing: the straddle-implied move into an earnings report or a [macro event](https://www.luxalgo.com/library/concept/macro-event-days/), read from the first expiry after it, sets the reaction the market expects, so the actual gap can be judged as inside or outside expectations. - Weekly and monthly maps: index traders draw expected-move levels for the current expiry and watch how price behaves near them into [expiration](https://www.luxalgo.com/library/concept/expiration-effects/), as reference lines rather than barriers. - Strike selection: option sellers often place short strikes at or beyond the expected move, while buyers check whether their target needs more movement than the market is pricing. - Stops and size: a stop well inside the expected move for the holding period sits inside priced noise, and sizing so the expected move costs a fixed amount applies the logic of [ATR-based stops](https://www.luxalgo.com/library/concept/atr-based-stop-distance/) with a forward-looking input. ## Expected Move vs related concepts - **Implied Volatility** (https://www.luxalgo.com/library/concept/implied-volatility/): Implied volatility is an annualized percentage; the expected move converts it into price units for one horizon. Same information, different units: one says how volatile, the other says how many points. - **Probability Cones** (https://www.luxalgo.com/library/concept/probability-cones/): Cones project a range forward from a volatility input, often realized volatility from price history, across every horizon at once. The expected move is the options-implied value for one expiry; a cone built from implied volatility passes through it. - **Standard-deviation Projections** (https://www.luxalgo.com/library/concept/standard-deviation-projections/): Despite the name, ICT standard-deviation projections are multiples of a prior range's height, with no statistics or options data involved. The expected move is a genuine one-standard-deviation estimate taken from option prices. ## FAQ ### How do you calculate the expected move? Multiply the price by implied volatility and by the square root of days to expiry over 365. For a 100-dollar stock with 20 percent IV and 30 days left, that is about ±5.73. The quick alternative is the at-the-money straddle price, about 4.6 in the same example, which runs roughly 20 percent narrower. ### How accurate is the expected move? It is the market's priced range, not a forecast. Index options have historically priced somewhat more movement than followed, and fat tails make large breaches more common than the 68 percent label suggests. ### Why do the straddle and IV methods give different numbers? The straddle prices the average absolute move, about 0.8 of a standard deviation, while the IV formula gives the full standard deviation. Skew, dividends, interest rates and the choice of strike nearest the money add smaller differences. ### Can I get an expected move for a symbol without listed options? Not an options-implied one. The alternatives are a realized-volatility projection such as a probability cone, or a related market's volatility index as a proxy, both of which answer a different question than the options market does. ## Related concepts - Volatility Estimators: https://www.luxalgo.com/library/concept/volatility-estimators/ - Close-to-close Historical Volatility: https://www.luxalgo.com/library/concept/close-to-close-historical-volatility/ - EWMA Volatility: https://www.luxalgo.com/library/concept/ewma-volatility/ - Parkinson Estimator: https://www.luxalgo.com/library/concept/parkinson-estimator/ - Garman-Klass Estimator: https://www.luxalgo.com/library/concept/garman-klass-estimator/ - Rogers-Satchell Estimator: https://www.luxalgo.com/library/concept/rogers-satchell-estimator/ - Yang-Zhang Estimator: https://www.luxalgo.com/library/concept/yang-zhang-estimator/ - Garman-Klass–Yang-Zhang Hybrid: https://www.luxalgo.com/library/concept/garman-klass-yang-zhang-hybrid/ - Jump Detection: https://www.luxalgo.com/library/concept/jump-detection/ - Volatility Signature Plot: https://www.luxalgo.com/library/concept/volatility-signature-plot/ --- Source: https://www.luxalgo.com/library/concept/expected-move/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/