02 / Concepts · Expected move
Expected move
The range options are pricing for the session, and how to use the 1σ band.
The expected move is the range the options market is pricing for an underlying over a period, usually shown as a band above and below the current price. A one standard deviation (1σ) band is expected to contain the move about two times out of three.
The bands in q-bitf#
| Band | What it covers |
|---|---|
| Upper / lower 1σ | The expected move for the rest of today. It narrows as the session runs out |
| 1D max / min | A projected outer band for the full day |
How to use it#
- Size and targets. A trade that needs more than the expected move is asking for an unusual day.
- Fades at the edge. In a positive gamma regime, moves into the edge of the band, especially near a wall, are good fade candidates.
- Breaks. Trading beyond the 1D band means the day has moved further than options priced in. In negative gamma that often keeps going.
The expected move comes from how options are priced, so it widens before known events such as CPI or FOMC. Check the economic calendar for what is coming.
Questions#
What is the expected move?#
The range the options market is pricing for an underlying over a period, shown as a band around the current price.
How often does price stay inside the expected move?#
A one standard deviation band is expected to hold the move about two times out of three, though real markets have fatter tails.
Call and put walls, the gamma flip, HVL, the expected move and the day range.
What positive and negative gamma mean for price, and how to read the regime badge.
Term structure, smile, the surface, vol premium, implied distribution and the pricer.