CluenexExpected move calculator
How do I calculate a stock's expected move from implied volatility?
Expected move = price × implied volatility × √(days ÷ 365). It is the one standard deviation range the options market is pricing: about 68% of the time the stock should finish inside it, if implied volatility is right. A quick shortcut for earnings is about 85% of the at-the-money straddle price.
How the calculator works
Implied volatility is quoted as a yearly number. To get the move for a shorter period, scale it by the square root of time:
expected move = price × IV × √(days ÷ 365)
For a $100 stock with 35% implied volatility and 7 days to expiry: 100 × 0.35 × √(7 ÷ 365) ≈ $4.85, so about $95 to $105.
Some traders use trading days (√(days ÷ 252)) instead. Over a week the two give similar answers; stay consistent.
The straddle shortcut
Before earnings, the at-the-money straddle (one call plus one put at the same strike) is the market's price for the move. Multiplying it by about 0.85 gives roughly the one standard deviation move. Many brokers show the straddle price itself as the "expected move".
What it does not tell you
- Direction. The range is symmetric.
- Tails. Stocks move more than two standard deviations more often than a bell curve says, especially on earnings.
- Whether options are cheap or expensive. For that, compare the implied move with how far the stock actually moved after past reports.
On Cluenex: Cluenex shows the expected earnings move next to the stock's real past moves, so you can see whether options look cheap or rich.
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Questions people ask
Is the expected move accurate?
It is the options market's estimate, not a forecast of direction. Studies of earnings moves find stocks stay inside the implied move most of the time, but the misses can be large.
Why multiply the straddle by 0.85?
For a normal distribution the average absolute move is about 0.8 standard deviations, so a fairly priced straddle is close to 80% to 85% of a one standard deviation move. 0.85 is the common rule of thumb.
Should I use 365 or 252 days?
Use 365 with calendar days or 252 with trading days. Both are common; over short periods the difference is small.
Education, not investment advice. A calculator is only as good as its inputs.