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I was scanning through some options chains the other day, and I realized something that might surprise you.
Most traders are overcomplicating one of the most useful calculations in options trading — the expected move.
Look, I’ve been around the block a few times, and I’ve seen people get lost in complex statistical models and fancy formulas when there’s a much simpler way to get the same information.
Here’s the thing — you can calculate the expected move for any stock using just the bid prices on calls and puts.
This isn’t just for earnings plays, either. This method works for any expiration date you’re looking at, whether it’s next week or three months out.
The Simple Step-by-Step Process
Here’s how it works…
Find the at-the-money strike closest to the current stock price, take the bid price on both the call and put, then add them together. That’s your expected move up and down.
Let me give you a real example…
When I looked at Google parent Alphabet (GOOG; GOOGL) recently, the calculation showed an expected move of $11.20. Tesla showed a much larger expected move of $23.85 for the same time frame.
These numbers tell you exactly what the market makers are pricing in for volatility.
The beauty of this approach is its simplicity. You’re looking for the strike that’s closest to the current price — and it’s hardly ever going to be exactly at the money. Once you find it, you just need the bid prices, which are the sell prices on both sides.
Why This Beats Complex Models
I call this the poor man’s way to do it, but honestly, does it matter if you use complex statistics? Nobody knows for sure anyway till we get there.
For longer time frames, this method becomes even more valuable.
When I calculated Tesla’s expected move out to December, it showed about $90 up or down, creating a $180 range. That’s crucial information for position sizing and risk management.
The market makers have already done the heavy lifting for you. They’ve priced in all the variables — volatility, time decay, supply and demand. Why reinvent the wheel when you can leverage their work?
This calculation gives you a realistic framework for setting profit targets and stop losses. If the expected move is $20, don’t expect a $50 move unless something extraordinary happens — so look closer to the money if you’re buying options.
Conversely, if you’re seeing unusual activity beyond the expected range, that’s when things get interesting.
Next time you’re evaluating an options trade, skip the complicated formulas and use this simple method. It’s practical, reliable and based on real market pricing.
Jeffry Turnmire
Jeffry Turnmire Trading
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Important Note: No one from the ProsperityPub team or Jeffry Turnmire Trading will ever message you directly on Telegram.
I’m just a regular dude in Knoxville, Tennessee: a husband, father, civil engineer, urban farmer, maker and trader.
I’ve been at this trading thing with real money for 20-plus years, and started paper trading over 35 years ago. I have a knack for making some epic predictions that just may very well come true. Why share them? Because I like helping other people — it’s the Eagle Scout in me.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
