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Options Jive

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Deriving Expected Move

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The simplified Expected Move formula “Stock Price ✕ (IV / 100) ✕ SquareRoot(N / 365)” allows for traders to easily calculate the market’s expectation for a particular stock to move a certain amount over any number of days. Remember, implied volatility is the driver of expected move, so when IV of a stock changes, so will the expected move.

Tom and Tony give an overview of how we can calculate expected move ourselves and how to incorporate into our options trading strategies.

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