{"id":2931,"date":"2024-09-18T13:26:58","date_gmt":"2024-09-18T13:26:58","guid":{"rendered":"https:\/\/blog.tradevision.io\/?p=2931"},"modified":"2024-09-29T14:17:00","modified_gmt":"2024-09-29T14:17:00","slug":"understanding-the-expected-move-a-guide-for-traders","status":"publish","type":"post","link":"https:\/\/blog.tradevision.io\/understanding-the-expected-move-a-guide-for-traders\/","title":{"rendered":"Understanding the Expected Move: A Guide for Traders"},"content":{"rendered":"\n<p>Hey everyone! Today, we\u2019re diving into a powerful concept that can enhance your trading strategy: the expected move. If you\u2019re currently navigating the options market, this is an essential tool that can help you make informed decisions. Let\u2019s break it down step by step.<\/p>\n\n\n\n<h2 id='what-is-the-expected-move'  id=\"boomdevs_1\" class=\"wp-block-heading\" >What is the Expected Move?<\/h2>\n\n\n\n<p>The expected move is a statistical measure that helps traders anticipate the potential price movement of an asset over a specified period. Typically, you\u2019ll encounter two percentages: <strong>68%<\/strong> and <strong>85%<\/strong>. These figures represent different confidence intervals:<\/p>\n\n\n\n<ul>\n<li><strong>68%<\/strong> is one standard deviation, indicating that there\u2019s a 68% chance the stock will move within this range by the expiration date.<\/li>\n\n\n\n<li><strong>85%<\/strong> expands this range, suggesting an 85% chance of the stock staying within the specified bounds.<\/li>\n<\/ul>\n\n\n\n<h3 id='using-the-options-screener'  id=\"boomdevs_2\" class=\"wp-block-heading\" >Using the Options Screener<\/h3>\n\n\n\n<p>To see the expected move in action, let\u2019s use a common ticker: <strong>SPY<\/strong>, the S&amp;P 500 SPDR. Here\u2019s how to access the expected move using your options screener:<\/p>\n\n\n\n<ol>\n<li><strong>Navigate to the Options Screener<\/strong>: Open your trading platform and go to the options screener.<\/li>\n\n\n\n<li><strong>Select a Ticker<\/strong>: Type in &#8220;SPY&#8221; to pull up the stock chart and options chart.<\/li>\n\n\n\n<li><strong>Choose an Expiration Date<\/strong>: For this example, let\u2019s select an expiration date about 30 to 45 days out\u2014say <strong>October 25<\/strong>.<\/li>\n\n\n\n<li><strong>Locate the Expected Move<\/strong>: In the bottom right corner, you\u2019ll find the expected move, represented by blue rectangles on the stock chart.<\/li>\n<\/ol>\n\n\n\n<h2 id='visualizing-the-expected-move'  id=\"boomdevs_3\" class=\"wp-block-heading\" >Visualizing the Expected Move<\/h2>\n\n\n\n<p>For SPY, let\u2019s say the current stock price is <strong>$548.68<\/strong>.<\/p>\n\n\n\n<ul>\n<li><strong>68% Expected Move<\/strong>: The blue rectangle indicates that by October 25, SPY is expected to move between approximately <strong>$520<\/strong> and <strong>$575<\/strong>. This means there\u2019s a 68% probability it will stay within this range.<\/li>\n\n\n\n<li><strong>85% Expected Move<\/strong>: When you switch to the 85% probability, the rectangle expands. This broader range reflects a higher probability of SPY remaining between these values, though it comes with a wider potential price movement.<\/li>\n<\/ul>\n\n\n\n<h2 id='trading-strategies-using-the-expected-move'  id=\"boomdevs_4\" class=\"wp-block-heading\" >Trading Strategies Using the Expected Move<\/h2>\n\n\n\n<p>Understanding the expected move can help you implement various trading strategies. Here are a couple of examples:<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<iframe loading=\"lazy\" title=\"Understanding the Expected Move Tradevision\" width=\"1200\" height=\"675\" src=\"https:\/\/www.youtube.com\/embed\/nyS3oEkOJcg?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n<\/div><\/figure>\n\n\n\n<h3 id='bull-put-spread'  id=\"boomdevs_5\" class=\"wp-block-heading\" >Bull Put Spread<\/h3>\n\n\n\n<p>If you\u2019re bullish on SPY, consider a <a href=\"https:\/\/www.tradevision.io\/#tutorials\" title=\"bull put spread\">bull put spread<\/a>. You might set your strike prices near the lower end of the expected move (e.g., below $520). This strategy allows you to capitalize on SPY\u2019s anticipated upward movement while managing risk.<\/p>\n\n\n\n<h3 id='bear-call-spread'  id=\"boomdevs_6\" class=\"wp-block-heading\" >Bear Call Spread<\/h3>\n\n\n\n<p>Conversely, if you believe SPY might decline, a bear call spread could be the way to go. Here, you would set your strike prices near the upper end of the expected move (e.g., above $575), aiming to profit from a potential downward movement.<\/p>\n\n\n\n<h3 id='iron-condor'  id=\"boomdevs_7\" class=\"wp-block-heading\" >Iron Condor<\/h3>\n\n\n\n<p>For a more neutral approach, consider an <a href=\"https:\/\/blog.tradevision.io\" title=\"iron condor\">iron condor<\/a>. This strategy involves setting your strike prices at both ends of the expected move\u2014taking advantage of the range and aiming for low volatility. You\u2019d look at break-even points of approximately <strong>$570.01<\/strong> (upper) and <strong>$517.99<\/strong> (lower) to gauge your risk and reward potential.<\/p>\n\n\n\n<h2 id='final-thoughts'  id=\"boomdevs_8\" class=\"wp-block-heading\" >Final Thoughts<\/h2>\n\n\n\n<p>While the expected move is a valuable tool, remember that it\u2019s not foolproof. The market can be unpredictable, and external factors can influence price movements. However, by incorporating the expected move into your trading strategy, you can make more informed decisions and potentially enhance your trading outcomes.<\/p>\n","protected":false},"excerpt":{"rendered":"Hey everyone! Today, we\u2019re diving into a powerful concept that can enhance your trading strategy: the expected move.&hellip;","protected":false},"author":5,"featured_media":2932,"comment_status":"open","ping_status":"open","sticky":true,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"csco_display_header_overlay":false,"csco_singular_sidebar":"disabled","csco_page_header_type":"","footnotes":""},"categories":[143,145,147],"tags":[146,144,138,148],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/posts\/2931"}],"collection":[{"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/comments?post=2931"}],"version-history":[{"count":3,"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/posts\/2931\/revisions"}],"predecessor-version":[{"id":2991,"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/posts\/2931\/revisions\/2991"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/media\/2932"}],"wp:attachment":[{"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/media?parent=2931"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/categories?post=2931"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.tradevision.io\/wp-json\/wp\/v2\/tags?post=2931"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}