How implied move works

Every time a company reports earnings, the options market makes a prediction: here's how much we think this stock could move. That prediction is called the implied move, and understanding it can fundamentally change how you approach earnings trades.

What the implied move is

The implied move is the market's best estimate of the magnitude of a stock's post-earnings price change. It's expressed as a dollar amount or percentage and is derived directly from the prices of near-term options.

Crucially, the implied move is non-directional. It says "we expect the stock to move ±$8", not whether it will go up or down.

How it's calculated

The simplest and most widely used approximation:

Implied Move ≈ Price of the ATM straddle (nearest expiry after earnings)

If the front-month ATM straddle (buying both the call and put at the closest strike to the current price) costs $9.00, the market is implying a move of approximately ±$9.00 by that expiration.

A more precise version uses the at-the-money call price alone:

Implied Move ≈ ATM call price × 0.85 (rough adjustment for put-call symmetry)

Both methods give you a fast estimate that's close enough for most practical purposes.

Implied move vs historical move

The implied move tells you what the market expects. Historical moves tell you what has actually happened.

Comparing the two is where the real analytical value lies:

Example: NFLX implied move is ±8% going into earnings. Over the last 8 quarters, NFLX has moved an average of ±6.5% on earnings. Options are slightly overpriced, a small edge for sellers.

One standard deviation

The implied move represents one standard deviation of the expected distribution. In statistical terms:

• The stock lands within the implied move range ~68% of the time
• The stock lands outside the implied move range ~32% of the time (16% in each direction)

This is why selling options around earnings isn't a sure thing, one in three earnings events produces a move larger than implied. The edge for sellers is that, over many events, IV tends to overstate actual moves.

How to use the implied move in practice

For options buyers:

• If you believe the stock will move significantly more than the implied move, buying options may be justified
• Calculate your breakeven: for a straddle, you need the stock to move more than the cost of the straddle to profit
• If the implied move is already pricing in a large move, the bar for profitability is high

For options sellers:

• If historical moves are consistently smaller than the implied move, selling strategies (iron condors, short strangles) have a statistical edge
• Structure your spread strikes just outside the implied move range to give yourself a buffer
• Your maximum risk zone is the tail, moves 1.5 to 2× the implied move

For spread sellers:

• Place your short strikes at or just beyond the 1 standard deviation range (the implied move) for roughly a 68% probability of profit
• Place short strikes further out (1.5× the implied move) for higher probability but less premium

Using Stryke's Implied Earnings Move tool

Stryke's Implied Earnings Move tool calculates the current implied move for every upcoming earnings event and compares it to the historical actual moves over the last several earnings cycles. This lets you quickly identify:

• Which upcoming earnings have overpriced options (implied > historical)
• Which have underpriced options (implied < historical)
• The exact breakeven levels for straddle buyers

This data is updated in real time as option prices change in the days leading up to each earnings announcement.

Common mistakes

Mistake 1: Buying options into earnings without checking the implied move. If the stock needs to move 10% for you to profit but has only moved 4 to 5% on the last six earnings, you're starting at a significant statistical disadvantage.

Mistake 2: Assuming the implied move is a ceiling. The implied move is one standard deviation, the stock will exceed it roughly 32% of the time. Don't structure trades that lose catastrophically on a 2× move.

Mistake 3: Ignoring the direction of historical surprises. If a stock consistently beats estimates and gaps up, the historical move distribution may be skewed bullish, relevant for choosing between a strangle and a directional spread.

Related terms: Expected move, IV crush, implied volatility, straddle, iron condor, short strangle

Try it on Stryke: See the implied move vs historical move for every upcoming earnings event in the Implied Earnings Move tool.