What is Implied Move? Definition, Formula, and Example
The implied move is the market's expected percentage swing in a stock around an earnings event, derived from at-the-money option prices.
What is Implied Move
The implied move is the market's expected percentage swing in a stock around an earnings event, derived from at-the-money option prices. It tells traders how far options traders believe the stock will travel after results are released, based on current premiums rather than historical averages.
How it's Calculated
Identify the at-the-money straddle for the nearest expiration after earnings: buy the call and put with strikes closest to the current stock price. Add the ask price of both legs to get the straddle cost. Divide that cost by the current stock price and multiply by 100.
Formula: Implied Move = (ATM Call Ask + ATM Put Ask) / Stock Price × 100
This percentage represents the expected one-standard-deviation move around the binary event.
Worked Example
Stock XYZ trades at $100 ahead of earnings. The nearest weekly expiration has a $100 call trading at $3.50 and a $100 put trading at $3.20. The straddle cost is $6.70.
Implied Move = 6.70 / 100 × 100 = 6.7%
Options prices imply a 6.7% move in either direction after earnings, meaning the market prices in a post-earnings range of roughly $93.30 to $106.70. If the stock moves only 4%, both sides of the straddle likely lose value despite a directional move.
When Traders Use It
Volatility sellers compare the implied move to historical post-earnings moves to decide whether premium is rich or cheap. Directional traders use it to size positions; if the implied move is 8% and risk tolerance caps at 4%, the trade exceeds the budget. Long straddle buyers need the stock to exceed the implied move just to break even before theta decay. the live scanner
Limitations / Common Misconceptions
The implied move is an expectation, not a guarantee. Stocks frequently move less than implied, causing volatility crush even when the direction is correct. It also assumes a normal distribution around the event and ignores gap risk beyond the expected range. Implied move does not predict direction; it only quantifies the magnitude the options market is pricing in.