1. What is Expected Move?

The Expected Move represents the range (in price terms) that a stock is expected to stay within over a specified period, based on its implied volatility (IV). It's a key concept in options trading that helps traders assess potential price movements.

2. How Does the Calculator Work?

The calculator uses the Expected Move formula:

Where:

• \( \text{Price} \) — Current price of the underlying asset
• \( \text{IV} \) — Implied volatility (as a decimal, e.g., 0.20 for 20%)
• \( \text{Days} \) — Time period in days

Explanation: The formula accounts for the non-linear relationship between time and volatility (via square root of time) and scales the volatility to the current price level.

3. Importance of Expected Move

Details: Expected Move helps options traders determine appropriate strike prices, assess risk/reward ratios, and set profit targets or stop-loss levels.

4. Using the Calculator

Tips: Enter the current price in currency units, implied volatility as a decimal (e.g., 0.30 for 30%), and the time period in days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between expected move and standard deviation?
A: Expected move represents one standard deviation (about 68% probability) of the price range for the given time period.

Q2: How does expected move change with time?
A: Expected move increases with the square root of time, meaning volatility compounds at a decreasing rate as time increases.

Q3: Should I use historical or implied volatility?
A: For options pricing and expected move calculations, implied volatility is typically used as it reflects market expectations.

Q4: How accurate is the expected move?
A: It's a statistical estimate - actual price movements may fall outside the expected range, especially during market shocks.

Q5: Can this be used for any asset class?
A: The formula works for any asset with options, but interpretation may vary for different asset classes (stocks, indices, commodities).