A trading tool that visualizes expected price moves using implied volatility from options, creating box indicators to show potential price ranges for weekly, monthly, and yearly timeframes.
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The Expected Move signal calculates potential price ranges by analyzing the implied volatility of at-the-money put and call options. It uses the current stock price and multiplies it by the option's implied volatility to determine a one-standard-deviation price range. The calculation provides a statistical projection of where the stock price is likely to move within a specific timeframe, typically covering about 68% of potential price outcomes.
The script generates visual boxes on a price chart representing these expected price movements for weekly, monthly, and yearly periods. By extracting implied volatility data from options, the tool transforms complex mathematical calculations into easily interpretable graphical representations that traders can quickly understand and use for strategic decision-making.
Why it may be useful
The Expected Move signal is crucial for traders because it provides a data-driven approach to understanding potential price volatility and market expectations. By translating complex options pricing information into visual box indicators, traders can quickly assess the probable price range for a stock, helping them make more informed trading decisions.
This approach allows investors to gauge market sentiment and potential price swings with greater precision. Understanding expected moves helps traders manage risk more effectively by providing a statistical framework for potential price movements. The signal enables traders to set more strategic entry and exit points, design more targeted options strategies, and develop a more nuanced understanding of market volatility across different timeframes.
When to explore it
The Expected Move signal is most effective when used in conjunction with other technical and fundamental analysis tools, particularly for stocks with liquid options markets. It works best for traders who want to understand potential price ranges before making trading decisions, especially during periods of known market events like earnings releases or significant economic announcements.
The signal is particularly valuable for options traders and those looking to manage potential price volatility. Traders should utilize this signal when they want a statistical view of potential price movements, helping to set realistic expectations and risk management strategies. It is especially useful for swing traders and day traders who need to assess potential price ranges quickly and make informed decisions about potential trade entries and exits.
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What we’ve verified
Access, alerts and repainting behaviour have not been independently verified for this indicator. Check the creator’s current publication and settings.
General descriptions and classifications are recovered research. Verified details above identify the specific checks we have completed. Check the creator’s current publication for later changes.
