What is the expected move?
The expected move is the one standard deviation (1σ) price range the options market is pricing for a stock over a given time period. There is approximately a 68% probability that the stock will stay within the expected move range. For premium sellers, selling strikes outside this range means you are selling options the market thinks have less than a 16% chance of being breached.
How to calculate expected move
The IV-based formula (used in the VolRadar Calculator): Expected Move = Stock Price × IV × √(DTE/365). For a $100 stock with 25% implied volatility and 30 days to expiration: $100 × 0.25 × √(30/365) = $7.17. The 1σ range is $92.83 to $107.17. VolRadar ticker pages also show an RV-based expected move using Price × RV × √(DTE/252) — comparing the two reveals whether options are overpriced. Note: the IV formula uses 365 (calendar days, since IV is quoted as a calendar-year annualized measure) while the RV formula uses 252 (trading days, since realized volatility is calculated from daily trading returns). This means the RV-based range is typically slightly narrower.
Expected move for strike selection
Premium sellers use the expected move to set strike prices. Selling a put below the 1σ lower bound gives you approximately 84% probability of profit at expiration. Selling outside the 2σ range pushes probability above 95% but collects less premium. The tradeoff between probability and premium collected is the core decision in premium selling.
Expected move around earnings
Before earnings, the expected move is inflated by the "earnings premium" embedded in IV. Straddle pricing just before the announcement is the market's estimate of the earnings move. After the announcement, IV crushes and the expected move drops dramatically. This is why selling premium through earnings is risky — the expected move changes discontinuously.
Expected move across time periods
Expected move scales with the square root of time, not linearly. A stock with a 5-day expected move of $5 has an expected move of about $5 × √(6) ≈ $12.25 at 30 days — not $30. This square root relationship means longer DTE trades have proportionally wider ranges, but the "cost per day" of buying options decreases. Premium sellers benefit from this mathematical property.
Using the VolRadar Expected Move Calculator
The free calculator shows 1σ and 2σ ranges for any stock and DTE from 1 to 65 days. Enter a ticker to auto-load the current price and IV, or input values manually. See exactly where to set your short strikes to stay outside the probable range — then jump into the Strategy Builder to price the full trade.