The Expected Move is a powerful calculation traders use that shows the range a stock could trade within over a specific timeframe (the expiration date of an option contract).
What makes this calculation so useful is that it makes these projections for a stock with up to 68% accuracy.
Mike Shorr covered the Expected Move when he guest hosted last Thursday’s MarketMinds episode.
After giving a detailed overview of what the calculation is and how it works, he calculated the Expected Move for Trade Desk Inc. (TTD) as an example.
For TTD, Mike went with the April 17 expiration date, which was 29 days away at the time this episode aired (on March 19).
While there are a few different ways to calculate this data in a stock, Mike uses one particular method that requires three specific pieces of data.
After applying the data into a calculator he built, it revealed the Expected Move for TTD was 18.24%.
That means TTD has a 68% chance of trading 18.24% above or below its current stock price at that time before the April 17 expiration date.
The analysis, insights, and strategies shared by Prosper Trading Academy’s coaches in Prosper Insider are strictly for educational and informational purposes only. All content reflects the personal opinions of the coaches and should not be construed as specific investment advice or recommendations. Any examples discussed are illustrative in nature and do not represent actual live trade signals or instructions to buy or sell securities. Trading involves risk, and individuals should carefully evaluate their own financial situation before making investment decisions.
Mike’s TTD example goes into more detail, which covers:
- The current stock price TTD was trading at the time
- Implied Volatility (IV) playing a role in calculating the stock’s Expected Move
- If the Expected Move says anything about a stock’s direction
- TTD’s specific price range it’s expected to within before April 17
- How the Expected Move can can help target strike prices for certain options strategies
