How to Calculate the Expected Move
There are two everyday ways to put a number on how far a stock is expected to move around earnings: read it off the option straddle, or compute it from implied volatility. Both land in the same place; here's the arithmetic for each, with worked examples.
Method 1: the straddle
Find the expiration just after the earnings date. Add the price of the at-the-money call and the at-the-money put. That's the straddle. It's the market's dollar estimate of the swing:
Expected move (%) ≈ straddle price ÷ stock price
On a $100 stock, if the ATM call is $4.20 and the ATM put is $3.60, the straddle is $7.80, an expected move of about ±7.8%. Some traders multiply the straddle by ~0.85 to isolate the one-standard-deviation move, since the raw straddle slightly overstates it; for a quick read the unadjusted number is fine.
Method 2: from implied volatility
If you have the implied volatility (IV) of the near-term options, the one-standard-deviation expected move over the option's life is:
Expected move (%) ≈ IV × √(days to expiration ÷ 365)
A stock with 60% IV and 4 days to expiration has an expected move of 0.60 × √(4/365) ≈ 0.60 × 0.105 ≈ 6.3%. The same relationship run backwards lets you infer the IV the market is charging from an observed implied move, the calibration tickerseer uses internally.
Turning the move into strikes
Once you have the expected move, the boundaries are simply the stock price plus and minus that percentage. A $100 stock with a ±7% expected move is priced to land, two times out of three, between roughly $93 and $107. Those edges are where many traders anchor the short strikes of a defined-risk spread: selling premium at or beyond the expected move rather than fighting IV crush with a long option. See the implied move explained for how this reads as a hurdle before a trade.
See this applied to next week's earnings
The Week Ahead applies this every Monday: the earnings-week setups our SeerForecast engine generates, with the named tickers and the reasoning behind each one.
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Frequently asked
How do you calculate the expected move for earnings?
Two ways. The straddle method: add the at-the-money call and put for the expiration after earnings, then divide by the stock price. The IV method: multiply implied volatility by the square root of (days to expiration divided by 365). Both give the one-standard-deviation move.
What's the difference between expected move and implied move?
They're the same idea under two names: the price swing the options market has priced in. 'Implied move' emphasises that it's implied by option prices; 'expected move' emphasises that it's the market's expectation. Both are one-standard-deviation estimates of magnitude, not direction.
Why multiply the straddle by 0.85?
The raw at-the-money straddle slightly overstates the one-standard-deviation move. Multiplying by roughly 0.85 corrects for that, giving a cleaner ~68% probability band. For a fast estimate the unadjusted straddle is close enough.