Implied Move Calculators

by Kristen May 25, 2012 1:14 pm • Education

Introducing our Calculators

The idea behind the Implied Event Move Calculator was introduced in our post on Discussing Implied Event Move Calculations. We used the math discussed in that post to build the calculators but with some secret sauce inputs included based on historical observations we’ve seen. The calculator is a way to determine what the market is implying the move will be for an upcoming event. We use this calculation whenever an event is far enough from the nearest expiry that we can’t use our back-of-the-envelope – straddle divided by underlying – price estimate.

The inputs required are the volatility for each of the two nearest months whose expiry is after the event, as well as the trading days to expiration of each of these months. Then the calculator should do the rest. Here’s a screenshot using 42 and 35 as volatilities for an event move:

Follow this link to go the the calculator page. The new page will be titled Analytics. We will be adding other tools that we feel aren’t available from other services soon.

The Daily, Weekly and Monthly Implied Moves were discussed in the Volatility post. These help the trader determine, given a certain volatility, what that volatility implies for a daily percent move, a weekly percent move or a monthly percent move in that underlying. The required input is volatility and this can be historical or implied over any time period. These implied moves can be useful in placing strategies.