To estimate an earnings expected move, use the at-the-money (ATM) call and put for an expiration that includes the announcement. Take the midpoint of each option’s bid and ask, add the two prices to get the ATM straddle, then divide by the current stock price and multiply by 100. A $200 stock with a $14 straddle has a rough implied move of $14, or 7%, giving a simple range of $186 to $214 through that expiration.
This is the magnitude being priced by options, not a prediction of whether the stock will rise or fall. The result is only as reliable as the expiration, quotes, liquidity and model label you use.
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What an earnings expected move measures
An earnings expected move is an options-market estimate of how far a stock could move over an expiration that spans its scheduled earnings release. The most transparent version is the price of an ATM straddle: one call and one put with the same strike and expiration, with the strike near the current share price.
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The straddle price is an observable premium, not a guaranteed outcome and not an assertion about direction. A $14 straddle says the market is charging roughly $14 for the combined upside and downside exposure to that expiration. Dividing $14 by a $200 share price expresses the same information as 7%.
The EarningsWatcher calculator explanation uses this call-plus-put approach. A Cboe educational presentation hosted by Fidelity also demonstrates comparing straddle cost with the underlying price.
“The at-the-money straddle price, divided by the stock price, gives a rough percentage estimate of the move the market expects around an event such as earnings.” — Options Industry Council, “August Office Hours FAQs: Straddles Strategy, Spreads and Managing Risk,” published September 2026.
The word “rough” matters. Prices change continuously, spreads can be wide, and an expiration that extends well beyond the report contains ordinary time value in addition to the event premium.
The core formula
| Quantity | Calculation | What it tells you |
|---|---|---|
| Call midpoint | (call bid + call ask) ÷ 2 | An estimated market price for the ATM call. |
| Put midpoint | (put bid + put ask) ÷ 2 | An estimated market price for the ATM put. |
| ATM straddle | call midpoint + put midpoint | The raw dollar premium for both options. |
| Rough percentage move | straddle ÷ stock price × 100 | The premium expressed as a percentage of spot. |
| Simple price range | stock price ± straddle | A raw dollar band through the selected expiration. |
In code notation, the basic calculation is:
ATM straddle = ATM call midpoint + ATM put midpointrough implied move % = ATM straddle ÷ stock price × 100range = stock price − straddle to stock price + straddle
Keep the quote timestamp with the result. A percentage calculated from a stale chain can be materially different from the market’s current estimate.
Step-by-step: calculate the move from an option chain
1. Confirm the earnings date and release timing
Verify the company’s confirmed report date and whether the release is scheduled before the opening bell or after the market closes. Select an expiration that occurs after the announcement. An expiration before the release cannot contain the event premium you are trying to measure.
Choose the first practical expiration after the report when possible. A much later expiration still includes earnings, but it also includes more regular time value from the additional days. If the date is uncertain, use the issuer’s investor-relations calendar or a regulated market-data source and record the date you used.
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2. Record the current stock price
Use a contemporaneous underlying price and note whether it is a regular-session quote, a premarket indication or another reference. The stock can move between the time you read spot and the time you read the option chain, changing which strike is closest to ATM.
3. Select the ATM strike
Find the listed strike nearest to the current share price. If the stock is at $200.20 and the chain has $200 and $205 strikes, the $200 strike is usually the nearest listed ATM choice. A more refined method interpolates between the straddle values at adjacent strikes to estimate a straddle exactly at spot. The OptionsMovement methodology describes midpoint quotes and interpolation to the underlying price.
Use the same strike and the same expiration for the call and put. Mixing strikes or expirations creates a spread rather than an ATM straddle and invalidates the simple formula.
4. Use two-sided quotes, not an old last trade
Read the bid and ask for both options. For each leg, calculate the midpoint:
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Then add the call midpoint and put midpoint. The midpoint is a valuation convention, not a guarantee that a trade can be executed at that exact price. Wide spreads, sparse trading and stale quotes make the estimate less dependable. If the displayed market is unusually wide, show the spread or qualify the result rather than presenting excessive precision.
5. Add the two option prices
Suppose the call midpoint and put midpoint together equal $14. The ATM straddle is therefore $14 per share, or approximately $1,400 for one standard 100-share option contract before commissions and other costs. The contract-value illustration does not change the percentage calculation, which uses per-share prices.
6. Divide by spot and convert to a percentage
For a $200 stock:
$14 ÷ $200 × 100 = 7%
The raw range is $200 − $14 to $200 + $14, or $186 to $214, through the chosen expiration. Label that result as a raw straddle range; do not silently call it a 68% or one-standard-deviation interval.
7. Recheck close to the announcement
Implied volatility, spot and bid/ask quotes can all change between the first calculation and the report. Recalculate with a fresh, timestamped chain if the number will be used for a trade plan, risk limit or published analysis.
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$200 stock with a $14 straddle
The arithmetic is direct:
- Underlying price: $200.
- ATM straddle: $14.
- Percentage: 14 ÷ 200 = 0.07, or 7%.
- Raw range: $186 to $214.
The range describes the premium distance associated with that expiration. It does not say the stock is equally likely to finish at either endpoint, and it does not identify a direction.
Cboe educational example
A Cboe presentation hosted by Fidelity uses an underlying at $17.50 and a mid-market straddle of $1.85. The calculation is:
$1.85 ÷ $17.50 × 100 = 10.57%
Rounded to one decimal place, that is 10.6%, with a simple raw range of $15.65 to $19.35. The figures are an educational illustration, not a current quote or a population statistic. The presentation and its transcript explain that the event is priced into the affected options when the expiration includes the report.
Raw straddle versus probability-style bands
“Expected move” is used inconsistently. Before publishing or trading, state exactly which number you mean.
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| Label | How it is produced | How to describe it |
|---|---|---|
| Raw straddle | ATM call + ATM put | Observed combined premium; a practical dollar-distance estimate and an approximate long-straddle expiry breakeven distance before costs. |
| 0.85 × straddle convention | Raw straddle multiplied by 0.85 | A convention intended to represent a narrower probability-style band under particular assumptions; not a universal probability. |
| Approximately 1.25 × straddle | Raw straddle multiplied by about 1.25 | A model-based estimate of one standard deviation for a short-dated, approximately normal move. |
| IV-based one-standard-deviation estimate | stock price × annualized IV × √(days to expiry ÷ 365) | A volatility-model result using the selected expiration’s implied volatility and a stated day-count convention. |
Why the 1.25 multiplier appears
Under a simplified short-dated ATM model with an approximately normal price move, the straddle is about 0.798 times one standard deviation. Taking the reciprocal gives approximately 1.2533. The OptionsMovement methodology uses 1.2533 for that interpretation.
For the $14 illustration, 1.2533 × $14 is about $17.55, or 8.8% of a $200 stock. That is not a second market quote; it is a model transformation of the same quote. Real earnings outcomes are jump-like and can have more extreme observations than a smooth normal or lognormal model implies.
What the 0.85 convention means
Some services multiply the raw straddle by 0.85 to create a narrower displayed band. Quadesto’s comparison explains that, under its assumptions, this band is closer to 50% coverage than to the roughly 68% coverage commonly associated with one standard deviation. The convention is therefore useful only when its label and assumptions are shown. It should never be presented as a guaranteed probability.
For the $14 illustration, 0.85 × $14 equals $11.90, producing a 5.95% band around $200. That arithmetic does not establish how often actual earnings moves will remain inside it.
When to use an IV-based calculation
For longer-dated expirations, the simple straddle-to-standard-deviation relationship becomes less reliable. A separate estimate is:
estimated one-standard-deviation move = stock price × annualized implied volatility × √(days to expiry ÷ 365)
Use the implied volatility associated with the same expiration and state whether days means calendar days or another convention. This calculation is not interchangeable with reading the raw ATM straddle. The OptionsMovement methodology switches to an IV-based approach for longer maturities.
Why the selected expiration matters
An expiration before earnings excludes the event
If the option expires before the report, its premium cannot represent the scheduled announcement. It may still reflect ordinary volatility, but it is the wrong instrument for an earnings move.
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An expiration shortly after the release limits the number of non-event days included in the premium. It is not perfectly pure: the option still contains time value and may be affected by market-wide or company-specific news before expiration.
A later expiration mixes event and ordinary movement
Longer-dated options include the announcement plus additional days of expected price variation. Their straddle can therefore be larger even when the earnings component is unchanged. If you use a later expiry, say so and avoid describing the entire premium as an earnings-only move.
What the number does not tell you
It does not predict direction
A straddle combines a call and a put, so the calculation is deliberately non-directional. A 7% estimate does not favor a 7% gain over a 7% loss, or vice versa. Direction requires a separate thesis and carries its own uncertainty.
It does not guarantee that a long straddle will make money
For a long straddle bought at strike K, the approximate expiry breakevens are K plus the total premium and K minus the total premium. The stock must move far enough to overcome both option premiums, commissions, bid/ask slippage and any other execution costs. The Options Industry Council strategy FAQ notes that the move must generate enough value to cover both premiums for the strategy to be profitable.
It is not a guaranteed probability range
Calling the raw straddle a “one-standard-deviation move” without a model is a category error. The 1.2533 transformation is conditional on a simplified short-dated approximation. Actual earnings distributions are discrete, can be skewed and can contain jumps.
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It does not isolate the earnings gap perfectly
Even an expiration immediately after the announcement includes time before the release and any price changes caused by unrelated news. More distant expirations add more ordinary time value.
It does not account for post-announcement volatility repricing
Implied volatility often rises before scheduled earnings and falls after uncertainty resolves. That decline, sometimes called volatility contraction, can reduce an option’s value even when the stock moves in the anticipated direction. The OIC educational FAQ discusses this risk for straddles and related strategies.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Quote quality and liquidity checks
A hand-built estimate is only as good as the chain data behind it. Before accepting a number, inspect:
- Bid/ask width: A very wide market means the midpoint is an uncertain estimate and may not be tradable.
- Quote age: Stale quotes can survive after spot or volatility has moved.
- Open interest and volume: Thin trading increases the chance of irregular marks and large execution slippage.
- Strike alignment: The call and put must share the same strike and expiry.
- Corporate actions: Splits, special dividends or other adjustments can make strikes and historical prices non-comparable.
- Timestamp: Record the date and time, especially during fast markets.
Do not substitute the last traded price for a current two-sided market when the last trade is old or occurred far from the current spot price. If you must use a mark supplied by a platform, identify whether it is a midpoint, theoretical value or last sale.
A disciplined workflow for a spreadsheet or script
- Inputs: enter the confirmed earnings date, release timing, underlying price, selected expiration, ATM strike, call bid, call ask, put bid and put ask.
- Midpoints: calculate
(call bid + call ask) / 2and(put bid + put ask) / 2. - Straddle: add the two midpoint values.
- Percentage: divide the straddle by spot and multiply by 100.
- Range: subtract and add the straddle to spot.
- Quality flags: record quote time, bid/ask widths and whether interpolation was used.
- Model label: identify the output as raw, 0.85-convention, 1.2533-based or IV-based.
- Refresh: rerun the calculation when spot, quotes or the event schedule changes.
A compact spreadsheet layout might use columns for spot, expiry, strike, call bid, call ask, put bid, put ask, call midpoint, put midpoint, straddle, percentage and lower/upper range. Keeping the raw inputs beside the result makes later audits possible.
Comparing the priced move with the stock’s history
Historical earnings reactions provide context, not proof that options are cheap or expensive. Use a consistent measurement for every report:
- Choose one event window, such as the close before the announcement to the next session’s open, or a clearly defined close-to-close interval.
- Collect the stock’s absolute percentage move for each prior report.
- Keep the treatment of overnight gaps, intraday moves and partial trading sessions consistent.
- Record the sample size and flag splits, special dividends, mergers or other corporate actions.
- Compare the current implied magnitude with the historical distribution without treating the comparison as a forecast.
The Cboe presentation and its transcript discuss comparing priced moves with prior stock reactions. EarningsWatcher also describes historical moves as a useful yardstick. No independently published statistic establishes a universal percentage of earnings moves that remain inside an expected-move band; the answer depends on the company, window, sample and definition.
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| Mistake | Why it fails | Fix |
|---|---|---|
| Using an expiry that ends before the report | The option cannot include the event. | Select an expiration after the announcement. |
| Using a far-later expiry without qualification | Extra ordinary time value is treated as earnings premium. | Use the nearest practical post-event expiry or disclose the additional exposure. |
| Adding last-sale prices | One or both trades may be stale. | Use contemporaneous bid/ask midpoints and show quote time. |
| Combining different strikes | The result is not an ATM straddle. | Use the same strike and expiry, or interpolate systematically. |
| Calling raw premium a 68% range | No probability model has been stated. | Label raw, 0.85-convention or 1.2533-based output explicitly. |
| Ignoring volatility crush | Post-report IV repricing can reduce option value. | Separate the stock move thesis from the volatility and execution effects. |
| Reporting excessive decimals | Quote noise creates false precision. | Round sensibly and disclose wide or illiquid markets. |
| Assuming the move predicts direction | A straddle is non-directional. | Treat it as a magnitude estimate only. |
How to present an expected move responsibly
A clear statement should include the underlying price, quote timestamp, strike, expiration, call and put midpoint method, raw straddle, percentage and model label. For example: “At 14:30 UTC, with the stock at $200 and the nearest post-earnings expiration, the ATM call-plus-put midpoint is $14, implying a raw 7% move, or $186–$214 through expiration.”
If you transform the number, put the transformation in the same sentence: “A 1.2533 short-dated normal-model adjustment would produce about $17.55, but that is a model-based one-standard-deviation estimate rather than the quoted straddle.” This prevents readers from confusing a market premium with a probability claim.
Practical checklist
- Confirm the earnings date and before-open or after-close release.
- Choose an expiration after the event and note how many non-event days it contains.
- Record a current stock price and the nearest listed strike.
- Capture two-sided call and put quotes at that strike and expiry.
- Calculate each midpoint and add them for the raw straddle.
- Divide by spot for the percentage and add/subtract from spot for the dollar range.
- Timestamp the calculation and check liquidity and spread width.
- Label any 0.85, 1.2533 or IV-based transformation.
- Account for volatility repricing, fees and execution if discussing a trade.
- Use consistent historical windows when comparing prior earnings reactions.
Final interpretation
The most defensible earnings expected move is the current, same-expiration ATM call-plus-put midpoint divided by spot. It is a market-implied magnitude for a defined period. It is not a directional forecast, a guaranteed probability interval or a promise that a long straddle will profit. Precision comes from matching the event and expiry, using liquid two-sided quotes, naming the model and keeping the timestamp visible.
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