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Expected move calculator

The implied volatility in an option’s price is the market’s estimate of how much the stock will move. Turn it into a price range, and into a rough chance that your put or call strike is reached by expiry.

How the numbers are worked out

• Expected move (one standard deviation) = share price × implied volatility × √(days ÷ 365).
• If the implied volatility is right, the stock ends inside the likely range about two times in three, and inside the wide range (two standard deviations) about 19 times in 20.
• Chance past the strike uses the same lognormal model option prices are built on, with no drift. For a put it is the chance of closing below the strike at expiry, which is roughly the chance of assignment.
• Chance of touching is the common rule of thumb of about twice the chance of finishing past it.

Why to treat it as a guide, not a forecast

• Real stocks gap more often than this model allows, especially around earnings. Each candidate profile shows how often that stock has actually gapped down.
• Implied volatility is higher before earnings and drops afterwards; a range spanning an earnings date is not comparable with one that does not.
• The profile links fill this in with 30-day realised volatility. That is how much the stock has moved, not what the market expects; swap in the implied volatility from the option chain.

Other calculators

Need a stock to run the numbers on? The Screen lists companies that pass the wheel screen, and each has a profile.