Using Expected Move the Right Way: A Simple Tool That Quietly Improves Every Options Trade

One of the most useful tools in my toolbox, as someone who makes decisions based on math, not hunches, is the Expected Move. Some traders ignore it. Others glance at it casually. But for a probability-based options trader, the Expected Move is often the quiet signal that keeps you on the right side of risk.

At its core, the Expected Move (sometimes called the Expected Range) is nothing more than the market’s best estimate of how far a stock or ETF is likely to travel over a specific expiration cycle. It’s calculated from two ingredients we already live with every day: implied volatility and time to expiration.

Because both of those inputs move constantly, the Expected Move shifts in real time. And if you learn to anchor your trades around it, rather than emotions, forecasts, or “strong feelings”, you’ll notice your decision-making gets calmer, cleaner, and more consistent.

Let me show you what I mean.

A Simple Example: IWM with 46 Days to Expiration

Imagine we’re looking at the Russell 2000 ETF (IWM) with 46 days left in the February options cycle. When you pull up the chain, you see a tan vertical bar stretching from roughly 240 to just above 265.

IWM is currently trading for 252.73.

That bar is the market’s projected path.

Said differently, the options market is implying that IWM has about a one-standard-deviation chance of closing somewhere between 240 and 265 at expiration.

Notice what this does not say. It doesn’t claim that IWM will land there. It simply gives you the statistical neighborhood most traders are pricing in.

And as option sellers, we care deeply about neighborhoods.

How I Use Expected Move in Real Trades

Once I know the Expected Move, everything else becomes simpler.

If the range is 240 to 265, I immediately ask myself:

• If bullish: Can I structure premium below 240?

• If bearish: Can I structure premium above 265?

That simple step alone removes an enormous amount of uncertainty. It forces you to build trades outside where the market already expects price to travel, an elegant way of letting probability do the heavy lifting.

Bullish Example: A High-Probability Bull Put Spread

When I’m modestly bullish, or even just not bearish, on IWM, my first instinct is not to buy shares or chase directional upside. Instead, I lean on a bull put spread, a risk-defined short put vertical that lets me get paid even if IWM trades sideways or drifts slightly higher or lower.

And as always, the foundation is the same:

With IWM trading at 252.73, the expected move places the lower statistical boundary around 240. So to build a high-probability setup, I step even farther outside that boundary and look at the 238/233 bull put spread.

Why the 238 Short Put?

The farther you move away from the expected move, the more breathing room you create between your strike and the market’s implied path. Selling the 238 put gives me nearly 15 points of cushion below the expected boundary and about 6.5% downside room from the current price.

In this case:

• Credit received: about $0.65

• Max profit: $65 per spread

• Max loss: $5.00 - $0.65 = $4.35 ($435 per spread)

• Return on risk: roughly 14.9% for 46 days

The probability of profit (OTM%) was approximately 80%. You’re not betting that IWM rallies; you’re betting that it doesn’t collapse beyond a level already considered unlikely by the market.

Let’s Talk About Probability of Touch

This is the hidden metric that too many traders ignore.

The probability of touch for the 238 short put was about 40%, which means:

• At some point during the life of the trade, there is a 40% chance IWM tags that strike.

• But tagging the strike is not the same thing as losing, this is simply a stress indicator.

For me, probability of touch is more important emotionally than mathematically. It tells me how often I’m likely to endure “is this trade in trouble?” moments.

My personal threshold: Under 50%, ideally closer to 35 to 40%.

A 40% probability of touch on a trade with an 80% probability of profit is ideal. It means the trade is likely to perform as intended without forcing you to babysit it daily.

And, importantly:

High-probability trades should feel uneventful. If you want excitement, there are casinos for that.

Bearish Example: A High-Probability Bear Call Spread

Now flip the script.

Suppose IWM looks a bit stretched and I want a bearish position. I can build a bear call spread, but again I want to sit outside the Expected Move, in this case, above 265.

In the example, the 267 short call carried a probability of success of 80% and a probability of touch of 40%.

Structuring the Trade

• Credit received: about $0.80

• Max profit: $80

• Max loss: $5.00 - $0.80 = $4.20 ($420 per spread)

• Return on risk: roughly 19% for 46 days

The probability of success on the 267 short call is around 80%, mirroring the bullish example. You’re simply betting that IWM doesn’t sprint above a level that the options market already considers statistically unlikely.

Probability of Touch on the Bearish Side

The probability of IWM touching the 267 strike at any point was around 40%, again under my 50% stress threshold. That puts the trade in the “low-maintenance” category.

But here’s where choices come in.

If I want to be even more conservative, I can push the short call farther out:

Going Safer: Selling the 270 Short Call

• Probability of success: rises to around 85%

• Probability of touch: falls to 30%

• Credit: declines from $0.80 to something smaller (typically $0.55 to $0.60)

This tradeoff is the heart of premium selling:

• More distance = more probability

• More probability = less premium

• Less premium = less drama

For many traders, especially those building wealth slowly and mechanically, the quieter emotional profile is worth the slight reduction in credit.

Why This Matters

Most traders spend their time trying to guess direction. High-probability spread traders spend their time trying to avoid stress.

By staying outside the expected move, whether bullish or bearish, you’re trading where probabilities are on your side, not where hope is.

And in the long run, the trader who avoids stress, avoids prediction, and avoids emotional combustion almost always outperforms the one who tries to outsmart the market every cycle.

Why Expected Move Matters (More Than Most Traders Realize)

Expected Move isn’t a magic number, and it doesn’t predict the future. What it does give you is a rational, unbiased anchor for your structure, your risk management, and your expectations.

In other words:

It keeps you from trading the market you want and forces you to trade the market that exists.

Every time I sell premium, bull puts, bear calls, condors, strangles, covered calls, cash-secured puts, I check the Expected Move first. It’s the quickest way to understand what the options market is already pricing in, and it sets the framework for the probability of success, probability of touch, and how much stress I’m inviting into my portfolio.

When you start viewing your trades through that lens, your results become more stable. Not because the market becomes easier, but because your process becomes stronger.

Bottom Line

The Expected Move is one of the simplest, most effective tools a premium seller can use. It helps you:

• set realistic expectations

• build structures outside of the market’s implied path

• choose strikes that match your risk tolerance

• manage open positions with clarity rather than emotion

If you make it part of your routine, every trade, every cycle, you’ll find that your probability-based approach becomes smoother, more consistent, and far more resilient.

As always: Know your probabilities before you click submit. Expected Move helps you do exactly that.

Probabilities over predictions,

Andy Crowder

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Disclaimer: The Option Premium provides educational content about systematic options strategies based on probability and risk management. This is not investment advice or a recommendation to buy or sell any security. Options trading involves substantial risk of loss and isn't appropriate for every investor.

All trade examples shown are for educational purposes only, they represent real positions but are illustrative of process, not promises of performance. Your results will differ based on timing, execution, market conditions, and individual decisions.

Before risking capital, consult with qualified financial, tax, and legal professionals about your specific situation. Past performance doesn't guarantee future results.