The expected move formula
Expected move = Price × IV × √(Days ÷ 365)Implied volatility is quoted per year. Multiplying by the square root of the fraction of a year left scales it to your time frame. Some traders use trading days (√(days ÷ 252)) instead; the difference is small for short expiries.
Worked example
Nifty at 25,000 with 13% IV and 7 days to expiry: 25,000 × 0.13 × √(7 ÷ 365) ≈ ±450 points. The market is pricing roughly a 68% chance Nifty finishes between 24,550 and 25,450, and about 95% between 24,100 and 25,900.
How traders use it
- Option sellers place short strikes outside the expected move to improve their odds.
- Option buyers check whether their target lies within a realistic move before paying premium.
- Before results, the straddle price shows how big a move the market is already pricing in.
Frequently asked questions
How accurate is the expected move?
It is a statistical estimate, not a prediction. If IV is priced correctly, the price should finish inside the 1σ range about 68% of the time and inside the 2σ range about 95% of the time. Real markets have fatter tails, so big moves happen more often than the model suggests.
Which IV should I use?
Use the at-the-money IV for the expiry you care about. For a quick Nifty estimate, India VIX works as a 30-day IV.
What is the straddle method?
The price of an at-the-money straddle (call + put at the same strike) is a market-based estimate of the expected move. Traders often use about 85% of the straddle price, which approximates the 1σ move.
Results are estimates for educational purposes only and are not investment, tax or financial advice. Verify figures with your broker or advisor before acting on them.