What the options market is saying before the announcement

Before a company reports, the options market has already put a specific number on how much it expects the stock to move. That number is called the expected move, it's calculated with a simple formula, and it's published for anyone who knows where to look.

What the expected move is and how it's calculated

It's how much the market expects a stock to move after reporting, in either direction. It's backed out of two options' prices and produces a concrete percentage: 6%, 11%, whatever it happens to be.

Where the number comes from

The logic is simpler than it sounds. An option is a contract with a price, and that price embeds how much movement is expected: nobody pays much for the right to buy something that's going to sit still.

The standard calculation uses an at-the-money straddle: you add the price of the right to buy and the right to sell, both at the strike closest to the current price. That total is, literally, what it costs to bet that movement will happen, direction aside.

Then you multiply by 0.85, a standard approximation that trading platforms also use as a quick reference.

With numbers. If a stock trades at $160 and the at-the-money straddle costs $7.80, the expected move is around $6.63 — 0.85 of $7.80. On $160, that's roughly a 4.1% move in either direction.

What the number doesn't say

It doesn't say direction. A 4.1% expected move means the market expects movement of that magnitude, up or down, without leaning either way.

It's a measure of how much uncertainty is priced in, not a directional prediction. Confusing the two is the most common error with this figure.

What that number means exactly

It represents roughly a one-standard-deviation range: there's about a 68% probability the price stays within that range after the result, and 32% that it exceeds it in one direction or the other.

It's the same standard deviation that came up when explaining what volatility is, applied to a single event rather than a full year.

The nuance that makes the number useful

Here's the practical part: a high expected move doesn't mean "this stock is going to fall," it means "there's more uncertainty here than usual."

And "than usual" is the key. An 8% expected move doesn't mean the same thing for a company that historically moves 4% on earnings as for one that historically moves 12%. In the first case the market expects double the norm; in the second, considerably less.

Without that comparison, the isolated number tells you almost nothing. It's a percentage without a scale.

The comparison that does inform

Three references turn that number into something usable:

Against the asset's own history. How much has this company moved, on average, on its recent earnings? If the implied figure sits well above, the market expects something exceptional.

Against previous quarters' implied figures. Is the market more nervous than it usually is before this company's results?

Against the sector. If every comparable company shows a similar implied figure, it's sector context; if this one stands out, it's specific to it.

None of the three is published in your app. All require holding the asset's history of reactions, calculating it, and comparing — which is precisely one of Volatly's background jobs: every asset has its own volatility profile built on its real history, and the expected move gets read against that profile rather than in a vacuum.

How to read it without an options account

Worth saying early: you don't need to trade options, or hold permissions to do so, to use this figure. Most people reading this course will never buy an option, and the expected move still helps them.

Why it helps even if you only buy shares

It tells you what a normal move looks like for that event. If the expected move is 4% and the stock falls 3.5%, it fell within expectations: the surprise wasn't large. If it falls 12% against a 4% expected move, something happened the market hadn't contemplated at all.

It helps you size risk beforehand. Knowing a position could move 9% the day after tomorrow is useful information for deciding how much money you want sitting there, even if you plan to do nothing about it.

It flags events that will be noisy. An unusually high expected move signals the market is deeply divided about that company, and that's worth knowing before rather than after.

Where to find it

Some brokers display it directly on the stock's page during the week before an earnings release. Others don't, and you have to calculate it by looking at the options chain — the list of option prices for that asset — which is usually available even without permissions to trade them.

It's public data. The barrier isn't access: it's knowing it exists, where to look, and what to compare it against.

The directional detail that does exist, and almost nobody checks

We said the expected move doesn't indicate direction. That's true of the number itself, but there's a directional clue sitting next to it, and it reads without trading anything.

Compare the price of the right to sell against the price of the right to buy, both the same distance from the current price. In theory they should cost something similar. In practice they almost never do.

If the right to sell costs clearly more, the market is paying more to protect against a fall than to participate in a rise. It's saying it fears the bad outcome more, even without knowing whether it will happen.

That asymmetry is normal in equities — protection usually costs more than upside bets, for structural reasons — so what's informative isn't that it exists, but that it widens or narrows relative to normal for that asset.

Which is, again, a number that only says something compared against its own history. And again, that comparison isn't made for you anywhere.

Why implied volatility rises before the announcement

Implied volatility follows a very regular pattern around an earnings event: it rises in the days before and collapses right after publication. It isn't a market feeling, it's precisely measured.

The exact figures

A study by Billings, Jennings and Lev, researchers at Wharton and New York University, measured this cycle:

Moment	Implied volatility move
Fifteen days before the announcement	+2.9% on average
Three days before	+1.8% on average
Announcement day	−2.5% on average

It rises steadily through the preceding weeks, accelerates in the final days, and drops sharply when the information becomes public.

The nuance almost nobody explains: part of that rise is arithmetic

This is the most interesting detail in the session and almost no manual covers it.

An option has to price two separate things: normal day-to-day movement, and the extra jump the event can cause. That extra jump is a fixed quantity of uncertainty concentrated on a specific date.

But implied volatility is expressed in annualised terms. And as the event date approaches, that fixed quantity of uncertainty gets spread across fewer remaining days, so annualised it produces a higher number.

Translated: part of the rise you see doesn't mean the market is getting more nervous. It means there's less time left. It's the same jump in uncertainty divided by fewer days.

Telling the arithmetic part from the genuine-nervousness part is what separates reading this figure from repeating it.

What IV crush is and why being right can still lose

When the result is published, the uncertainty that was priced in disappears at once, and with it much of the value of options bought to speculate on the move. That's called IV crush — IV standing for implied volatility — and it explains something that looks impossible: losing money having called the direction correctly.

The case, step by step

Someone believes a stock will rise on earnings. They buy a call option the day before, paying an expensive premium because implied volatility is at its highest point of the whole quarter.

Results come out. The stock rises, exactly as expected.

But it rises 2% when the expected move was 5%. The uncertainty has resolved, implied volatility collapses, and the option loses more value from that collapse than it gains from the price rise.

They called the direction and lost money.

Why this matters even if you don't trade options

For two reasons, and neither requires buying a single option.

It explains moves that look absurd from outside. Seeing a stock rise 2% after earnings while commentary says "it was a disaster for anyone betting on the upside" now makes sense: they're talking about different instruments.

It explains part of the underlying stock's behaviour. Whoever bought options before the event unwinds them afterwards, and that activity leaves traces in the stock's market during the following hours.

The options market doesn't predict direction. What it does is put a price on uncertainty, and that price is public, measurable, and available before the event.

Reading it doesn't tell you what will happen. It tells you how exceptional each possible outcome would be, which is a different question and a considerably more useful one.

What to remember

• The expected move is calculated by multiplying the at-the-money straddle price by 0.85, and represents the range where the price stays with 68% probability.
• It indicates magnitude, not direction, and only informs when compared against that asset's real history.
• Implied volatility rises 2.9% in the fifteen days before and falls 2.5% on announcement day, per Billings, Jennings and Lev.
• Part of that pre-announcement rise is pure annualisation arithmetic, not growing nervousness.

Related: what "risk" really means · what each indicator measures · how to read a full event, start to finish