Options Expected Move Calculator

Formula

The formula to calculate the expected move of an option (EM) is:

\[ \text{EM} = S \cdot IV \cdot \sqrt{\frac{T}{365}} \]

Where:

\( \text{EM} \) is the expected move of the option
\( \text{S} \) is the current price of the underlying asset
\( \text{IV} \) is the implied volatility of the option
\( \text{T} \) is the time until expiration in days

What is Options Expected Move?

Options Expected Move is a financial metric used in options trading to predict the potential price range of an underlying asset, such as a stock, within a certain period. It is calculated based on the price of the options contracts for that asset and represents the one standard deviation price range. This means that the market predicts there is a 68% probability that the price of the asset will fall within this range. This information can be useful for traders in making decisions about buying or selling options.

Example Calculation

Let's assume the following values:

Current Price of Underlying Asset (S) = 100
Implied Volatility (IV) = 0.2
Time Until Expiration (T) = 30 days

Using the formula to calculate the expected move:

\[ \text{EM} = 100 \cdot 0.2 \cdot \sqrt{\frac{30}{365}} = 100 \cdot 0.2 \cdot 0.287 = 5.74 \]

The expected move (EM) is 5.74.