What Is the Expected Move? How Options Price an Earnings Day (and IV Crush)

The expected move is the size of the price swing, in either direction, that a stock's options imply by an expiry, usually read from the at-the-money straddle.

Ahead of a company's quarterly report, the options that expire just after it cost more than usual, and that extra cost can be turned into a number: the move the options market is pricing for the report. This page covers how the straddle becomes an expected move, how implied volatility converts into the same figure, why implied volatility drops once the report is out (the effect traders call IV crush), how realized earnings moves have compared with implied ones in Kresmion's data, and what the number does not say. It is descriptive throughout.

How the straddle sets the expected move

A straddle is a call and a put on the same stock with the same strike and the same expiry (the options explainer covers each leg). At expiry it is worth exactly the distance between the share price and the strike, whichever way the price went. Its price today is therefore what the market charges for the size of the move to expiry, with no view on direction. Divided by the share price, it becomes a percentage.

A hypothetical, with every figure invented: a stock trades at $100.00 the afternoon before it reports. The first weekly expiry after the report is three sessions away, and the call and put struck at $100 together cost $6.17. The expected move is $6.17, or about 6.2 percent either way, and the straddle is worth more than $6.17 at expiry only if the stock finishes below $93.83 or above $106.17.

Three practical details change the number:

• The strike is rarely exactly at the price. One method, Kresmion's, interpolates between the straddles at the two strikes either side of the share price.
• The expiry has to come after the report. For a report after the close, the first session to trade on the news is the next morning; for one before the open, it is the same day. The straddle has to expire no earlier than the close of that session.
• The straddle also prices ordinary days. An expiry three sessions out also carries the ordinary day-to-day variance of all three sessions, so the figure slightly overstates the report alone.

From implied volatility to a move

Implied volatility is quoted as an annual figure. To turn it into a move by an expiry, multiply by the share price and by the square root of the time to expiry in years. Measure that time on the same basis the implied volatility was annualized on. Most quoted implied volatilities, including the ones behind Kresmion's option tools, are annualized over 365 calendar days, so a quoted figure takes calendar days over 365. To keep the arithmetic in sessions, the hypothetical below uses trading sessions over a 252-session year, the year the implied volatility page uses for realized volatility: an implied volatility of 70.82 percent with three sessions to expiry gives:

70.82% x square root of (3 / 252) = 7.73%

That is one standard deviation of the move under the model's assumption of normally distributed log returns. The straddle sits a little lower. For an option struck at the current price, with interest rates close to zero, the Black-Scholes formula reduces to approximately:

straddle = 0.8 x share price x implied volatility x square root of time

The 0.8 is the square root of (2 divided by pi), about 0.798. Applied here, 0.798 x 7.73% = 6.17%, the $6.17 straddle in the example (the full formula gives a cent less). The same 0.798 is the average absolute size of a normally distributed move measured in standard deviations, which is why the straddle is read as the expected size of the move, and why one standard deviation is about 1.25 times the straddle. Sources that quote an expected move do not all use the same convention, so check which one a stated figure uses before comparing it.

Under that normal approximation, a move larger than the straddle happens about 42 percent of the time, and a move within one standard deviation about 68 percent of the time. Those are properties of the model, not of any stock.

Why implied volatility falls after the report

Implied volatility is a rate per year, but a report packs a large share of the uncertainty into one session. Split the variance, the square of volatility, into ordinary sessions and the event. Continue the hypothetical:

Once the report is out, the event term is gone. With two ordinary sessions left, the same expiry's implied volatility falls back to 30 percent, and if the share price has not moved the straddle is worth about $2.13 instead of $6.17. The drop from 70.8 percent to 30 percent is IV crush: the event's variance has been spent, whatever the price did. The one session that passed accounts for only a small part of the loss; most of it is the report leaving the option. (Theta describes the ordinary part.)

The same arithmetic explains the shape of the expiries. A monthly option about 21 sessions out spreads the same 7 percent event over many more ordinary sessions, so its implied volatility before the report is about 38.6 percent, not 70.8. The first expiry after the report carries the highest implied volatility, and the effect fades with distance.

Implied against realized: what Kresmion's data shows

Kresmion keeps, for each print of the names it covers, the straddle-implied move read from the end-of-day option chain of the last session before the report (for a report after the close, that day's own closing chain) and the move that followed. The realized move is close to close: from the report day's close to the next session's close for a report after the close, and from the previous close to the report day's close for one before the open. Over the 35 prints with a stated report time and a stored chain, across 34 US-listed names between 29 July and 23 October 2026, read on 25 October 2026:

In this sample the median report moved the stock by about 0.7 times what the options had priced, and about a third of reports moved it by more. The 34 percent is below the 42 percent the normal approximation gives for a move beyond the straddle, but 35 prints from one stretch of a reporting season cannot settle whether a gap like that holds, and part of it may come from the straddles expiring one to seven calendar days after the chain snapshot (two at the median), so they also price some ordinary time. The figures describe these past prints only and say nothing about the next one.

Reading an expected move without over-reading it

• It has no direction. A straddle pays on a fall as much as on a rise, so the expected move says how far, never which way.
• It is a price. It comes from the prices options buyers and sellers quote, which is not the same thing as a measured probability; the implied probability tool shows the risk-neutral distribution behind option prices and why it differs from real-world odds.
• It is relative to the stock's own history. In the Kresmion sample above, implied moves ran from about 3 percent to more than 13 percent, so the same percentage means different things for different stocks. Comparing it with the same stock's past realized moves, with the number of prints stated, gives it scale.
• It inflates other volatility readings. A 30-day implied volatility that spans a report carries the event's variance, so it reads higher before the report for the arithmetic reason above. The IV rank tool places a stock's 30-day at-the-money implied volatility within its own stored range, which is worth reading with the report date in mind.

Signed-in Kresmion users see the per-name version of the data above on the EARN tab of the greeks board, which lists each covered stock's recent prints with the straddle-implied move, the realized move and the count of prints where the realized move was larger, and a signed-in company page shows the move priced into the expiry after the next report when one falls within 30 days.

Honest limitations

The worked example is invented to show the arithmetic. The Kresmion figures come from 35 prints over about three months, a small sample from one part of the year, and they cover the stocks in Kresmion's options universe only. Prints dated only by the filing of a results 8-K were left out because Kresmion's record carries no report time for them, and one row that duplicated another print was removed. The implied move is the straddle mid on the end-of-day snapshot of the last session before the report, which can differ from the price in the final minutes before the report. The realized move is close to close, so it misses the intraday range, and it covers one session. The normal-distribution figures are model properties that real returns do not follow exactly.

Key takeaways

Frequently asked questions

How do you calculate the expected move for earnings?

Add the prices of the at-the-money call and put for the first expiry after the report, then divide by the share price. A $6.17 straddle on a $100 stock is an expected move of about 6.2 percent in either direction. From implied volatility, multiply the share price by the implied volatility and by the square root of the time to expiry in years for one standard deviation, about 1.25 times the straddle figure.

Is the expected move a prediction of where the stock goes?

No. It is the price of an option position that pays on the size of a move in either direction, so it carries no direction, and it reflects what options traders paid rather than a forecast. In Kresmion's sample of 35 prints between 29 July and 23 October 2026, the realized move was smaller than the implied one about two times in three.

What is IV crush?

IV crush is the fall in an option's implied volatility once an event it was pricing, such as an earnings report, has passed. Before the report, the expiry just after it carries the event's extra variance, which lifts its implied volatility; after the report that variance is gone, so implied volatility drops back toward its ordinary level even if the share price barely moved.

How often do stocks move more than the expected move on earnings?

In Kresmion's data, 12 of 35 prints by names in its options universe, with a stated report time and a stored option chain, between 29 July and 23 October 2026, moved by more than the straddle-implied move, about 34 percent, and the median realized move was 0.69 of the implied one. The sample is small and covers a short period, so it describes those prints rather than a fixed rate.

Why do options cost more before earnings?

Because the expiry just after a report has to cover the report as well as the ordinary sessions. That extra variance raises implied volatility for that expiry, and so the price of both calls and puts, until the report is out.

This page is information, not investment advice.

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Source: Black, F. and Scholes, M. (1973), "The Pricing of Options and Corporate Liabilities", Journal of Political Economy 81(3), 637 to 654, https://doi.org/10.1086/260062 ; worked straddle, variance and IV crush examples: hypothetical figures computed by Kresmion ; implied and realized earnings moves: Kresmion earnings-move data for the options universe, 35 prints with a stated report time between 29 July and 23 October 2026, read 25 October 2026 ; Kresmion IV rank and implied probability tools.

Kresmion Research.