Implied Move for Earnings Options

How to calculate the earnings implied move, compare it to history, and use it to size options trades around earnings.

What is the earnings implied move?

The implied move is the market’s estimate of how far a stock might move around earnings, based on option prices. It’s usually expressed as a percentage move up or down from the current price.

For earnings, traders usually look at the nearest expiration that contains the first trading session after the release (depends on whether the report is AMC or BMO).

Quick way to calculate implied move

A common rule of thumb is the at-the-money (ATM) straddle:

• Pick the expiration that includes the first full trading session after earnings.
• Find the ATM call and ATM put (closest strike to current stock price).
• Compute: (call price + put price) ÷ stock price.

Example: stock at $100, ATM call = $6, ATM put = $5:
(6 + 5) ÷ 100 = 0.11 → 11% implied move.

Why implied move matters for earnings trades

• It tells you roughly where the market expects the breakevens on a straddle.
• It’s a simple yardstick to compare against the stock’s historical earnings moves.
• It helps you decide whether to lean long vol (if implied looks cheap) or short vol (if implied looks rich).

Implied move vs. historical earnings moves

Looking at implied move in isolation isn’t enough. You want to see it in context:

• Average past earnings move (absolute %).
• Standard deviation of earnings moves (how wide the range is).
• Percentiles of past moves (e.g., 50th, 80th, 90th).

If the current implied move is, say, 7%, but the stock has a history of 12–15% earnings moves with fat tails, that’s a very different setup than a sleepy name where 4–5% is already large.

How EarningsWatcher helps with implied move

1. Moves Analyser

Moves Analyser shows the distribution of past earnings moves so you can immediately see:

• Average and median earnings move.
• Standard deviation and tails.
• How the current implied move stacks up against history.

2. Simulator

The Simulator lets you plug in any structure (straddle, strangle, inverse butterfly, etc.) and see:

• How that position behaves across different stock moves from −X% to +X%.
• How IV crush by strike and expiration affects P/L around the implied move.
• Realistic risk/reward if the actual move ends up inside or outside the implied range.

How to use implied move in practice

For long volatility setups

• Look for tickers where the implied move is modest versus their historical earnings moves.
• Favor defined-risk structures (e.g. inverse butterflies) if IV is high but history shows explosive tails.
• Calibrate your sizing so a “normal” move doesn’t blow up the account if you’re wrong.

For short volatility setups

• Look for names with tight, well-behaved move distributions and few extreme outliers.
• Make sure your breakevens sit outside most historical moves, not inside them.
• Use defined-risk structures (iron condors, butterflies) rather than naked short straddles/strangles.

Common mistakes with implied move

• Mixing expirations (using the wrong expiry relative to the earnings date).
• Forgetting that IV crush hits different strikes/expiries differently.
• Ignoring liquidity and spreads when trying to size trades right on the implied-move strikes.