Expected Move by Option's Implied Volatility High Liquidity

The Expected Move by Option's Implied Volatility High Liquidity indicator plots automated visual ranges that reflect weekly, monthly, and yearly expected moves based on "At The Money" put and call options' implied volatility. It provides traders with a probabilistic framework for price action, highlighting the one-standard-deviation range where an asset is statistically likely to trade.

Usage

Traders use this tool to gauge market expectations and manage risk. The indicator generates colored boxes on the chart representing different timeframes:

• Weekly Boxes: Updated every weekend following the Friday close to show the anticipated range for the upcoming week.
• Monthly Boxes: Visualizes the expected price range for the current month.
• Yearly Boxes: Displays the long-term volatility expectations for the calendar year.

If a stock is trading at $100 with a 20% implied volatility, the indicator will plot a range between $80 and $120. Statistically, there is approximately a 68% probability that the price remains within these boxed areas by the time of option expiry.

Details

The Expected Move is calculated using the current underlying price and the implied volatility (IV) derived from "At The Money" (ATM) options. By applying a one-standard-deviation multiple to the IV, the script identifies the range that encompasses the majority of potential price outcomes.

This specific version of the tool is optimized for assets with high option liquidity, ensuring that the IV data used for calculations is robust and representative of actual market sentiment. Data is manually updated on a weekly basis (every Saturday) to reflect the closing values from the previous Friday.

Settings

Visibility Toggle

• Show Expected Move Weekly: Toggles the visibility of the current week's expected move box.
• Show Expected Move Weekly Previous Week: Displays the expected move box for the prior week for backtesting or review.
• Show Expected Move Monthly: Toggles the visibility of the current month's expected move box.
• Show Expected Move Monthly Previous Week: Displays the monthly expectation as it stood one week ago.
• Show Expected Move Yearly: Toggles the visibility of the yearly expected move range.

FAQ

How do I interpret the boxes on the chart?

The boxes represent a one-standard-deviation move. There is a statistical 68% chance that the asset price will expire within the boundaries of the box for that specific timeframe.

Why are some symbols not showing data?

This indicator focuses on symbols within a specific range of high option liquidity. If a symbol does not meet the liquidity requirements or is outside the hardcoded dataset (JBL-NOTE range), data will not be displayed.

How do I access Expected Move by Option's Implied Volatility High Liquidity?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.