This 7-Minute Video Will Teach You the One Number That Makes Strike Selection Obvious.

Key Concepts

Expected Move: A market-derived estimate of the potential price range of an asset over a specific duration, based on implied volatility rather than subjective analysis.
Implied Volatility (IV): The market's forecast of a likely movement in a security's price, which dictates option premiums.
Copper Strip: A visual tool in the tastytrade platform representing the expected move range.
Standard Deviation: A statistical measurement used to define the probability of a price staying within a certain range (typically 67-68% for one standard deviation).
Premium Selling: An options strategy where the trader collects credit by selling options, benefiting from time decay and volatility contraction.
Probability of Profit (POP): The statistical likelihood that an options trade will be profitable at expiration.

1. Understanding the Expected Move

The "expected move" is an objective metric derived from the collective wisdom of all market participants—including institutions and retail traders. Unlike chart patterns or analyst opinions, it is calculated directly from the implied volatility present in the options market. It does not predict direction (up or down) but provides a quantitative framework for the magnitude of potential price movement over a specific timeframe.

2. Practical Application in the tastytrade Platform

The platform provides two primary ways to visualize this data:

The Copper Strip: A visual bar located on the trade page that highlights the expected price range for a selected cycle.
Numerical Representation: Found in the upper right-hand corner of the trade page, this provides the exact price points for the upper and lower bounds of the expected move.

Case Study: Amazon (AMZN) When analyzing Amazon with 62 days to expiration, the platform displays a symmetric expected move. This symmetry exists because the market does not know the future direction of the stock; it only prices in the potential volatility.

3. Methodology: Copper Strip vs. Theoretical Models

The video distinguishes between two methods of measuring price ranges:

The Copper Strip (Practical): Based on real-time market prices. It is typically calculated by taking approximately 85% of the total straddle price (the sum of the at-the-money call and put premiums). This is the preferred method for active traders.
Blue Dashed Lines (Theoretical): Represents a standard normal distribution model for plus/minus one standard deviation. While useful for academic purposes, it is considered less practical than the market-derived copper strip.

4. Strategic Implementation: Strike Selection

For premium sellers, the expected move serves as a baseline for selecting strikes:

Strangle Strategy: To maintain a neutral position with a high probability of success, traders can sell options one or two strikes outside of the expected move.
Result: This methodology typically yields a Probability of Profit (POP) of approximately 70% at the time of entry.

5. Notable Quotes

"It is the objective understanding of the overall market, specifically the implied volatility that is in the market."
"The expected move... gives you a really nice idea around the potential magnitude of a given move."

6. Synthesis and Conclusion

The expected move is a foundational tool for objective trade entry. By aligning strike selection with the market's own volatility expectations, traders can mathematically tilt the odds in their favor (e.g., achieving a 70% POP). However, the speaker emphasizes that this is only the first step. Successful trading requires a comprehensive approach that includes:

Trade Entry: Using the expected move to set strikes.
Position Management: Targeting specific profit levels (e.g., 50% of max profit).
Duration Management: Monitoring trades as they approach expiration (e.g., 21 days to go).

Ultimately, the expected move provides the "baseline" for a trade, but ongoing management is required to navigate the position to a successful conclusion.