The Options Seller’s Guide to Expected Move

Why Most Options Sellers Are Leaving Edge on the Table

If you’re an options seller, your success depends on how accurately you can price risk.

But week after week, most traders skip over the one number that tells them exactly what the market expects in terms of price movement: The Expected Move.

They glance at the charts. Scan the Greeks. Fire off an iron condor or vertical spread.

But they never ask: “What range of movement is already priced in?”

The expected move answers that question. And if you're selling premium without using it, you're trading blind to the one risk variable you could actually define.

This article shows you how to fix that, simply and practically.

What Is the Expected Move?

The expected move is the market’s implied forecast of how far a stock or ETF might move, up or down, over a specific time period. It's derived from implied volatility (IV) and tells you the statistically expected price range for an expiration cycle.

Here's what it's not:

• It's not a directional prediction.

• It's not your opinion.

• It's not some black box signal.

It’s the sum total of how much market participants are willing to pay to protect against movement in either direction.

If NVDA is trading at $144.50 and the expected move for the next 32 days is approximately ±$11, the options market is pricing a 68% probability (1 std. deviation) that NVDA stays between $133.50 and $155 through that particular expiration in 32 days.

For premium sellers, that range isn’t trivia, it’s the battleground.

How to Calculate the Expected Move (the Simple Way)

Most retail platforms now display the expected move, but in case they don’t, here’s the back-of-the-envelope formula that professionals still use:

Let’s say SPY is at $600 and the:

• 600 Call is $4.25

• 600 Put is $4.30

Expected Move = $8.55

Now you have a statistically valid price range:
$580 ± $8.55 = $571.45 to $588.55

That range is where the market believes price will stay about 68% of the time (1 standard deviation). That’s your key reference point for structuring trades.

Why It Matters for Premium Sellers

Selling options is a probability game.

Your job isn’t to guess direction, it’s to define risk and collect premium when the market stays within a range.

That range needs to be based on something more than intuition. It needs to be based on what the market already expects.

That’s what the expected move gives you: a framework for building trades with edge.

When you sell options inside the expected move, you're selling risk the market expects to happen. When you sell outside it, you're taking the other side of an unlikely event. That’s where edge lives.

Strategy #1: Using Expected Move with Iron Condors

Iron condors are a neutral, range-bound strategy: sell a call spread above and a put spread below the market. You want the underlying to stay rangebound.

Here’s how you structure them properly using the expected move.

Let’s go back to NVDA:

• NVDA = $144.50

• Expected Move = ±$11

• Range = $133.50 to $155

A reasonable iron condor might be:

• Sell 130/125 Put Spread

• Sell 160/165 Call Spread

• Collect $0.90–$1.00 credit on $5-wide wings

You’re setting up a trade just outside the expected range. You have probability on your side, and clear boundaries for max loss.

The mistake most sellers make? Selling strikes inside the expected move to chase more premium, and getting burned when the market behaves exactly as expected.

Strategy #2: Using Expected Move with Vertical Credit Spreads

Vertical spreads (bull put or bear call) give you more directionality, but still work best when built beyond the expected move.

Example: Bear call spread on QQQ

• QQQ is at $530

• Expected Move = ±$30

• Sell 570/575 call spread (above the upper bound)

If QQQ stays below $570 by expiration, you keep the premium. If it runs through the range, your risk is capped.

These work especially well when IV Rank is high, giving you inflated premiums outside expected movement.

👉 To integrate this with IV data, see: The Implied Truth - IV Rank, IV Percentile, and RSI.

When Expected Move Fails

The expected move is a probability range, it’s not gospel.

But be cautious:

• During earnings, expected moves can be inflated

• After macro surprises, IV can rise sharply mid-week

• In thinly traded names, option pricing can be unreliable

Use the expected move as a guidepost, not a guarantee.

And always pair it with tools like:

• IV Rank: Tells you whether current volatility is high/low in historical context

• RSI: Helps spot short-term overbought/oversold extremes

Avoiding the Most Common Mistakes

Let’s be blunt. Here’s what gets traders into trouble:

1. Chasing premium by selling inside the expected move.
   You collect more, but your win rate drops, and the market’s already pricing that move as likely.

2. Ignoring earnings or macro events.
   The expected move might be wide, but the actual move could be even bigger. Avoid selling near-term premium unless you understand the risk.

3. Skipping context.
   The expected move is powerful, but stronger when combined with IV Rank, RSI, and liquidity filters.

Final Word: Trade with What the Market Is Telling You

The expected move is not some fancy indicator. It's the market’s own pricing of risk.

If you're serious about premium selling, you can't afford to ignore it.

Use it to:

• Pick your strikes

• Set realistic break-evens

• Avoid overcrowded setups

• Sell options where the market doesn't expect price to go

It won’t make you rich overnight. But it will keep you aligned with the probabilities.

And in options selling, consistency comes from respecting probability, not chasing premium.

Probabilities over predictions,

Andy

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