Condition: Expected Move and Expected Move Consumption

Updated: April 22, 20265 min read

The Expected Move is the market-implied expected daily movement of the respective Underlying. This always refers only to the movement for the current trading day.

The value is based on option prices and shows how strongly the market is expected to move from the perspective of market participants until the close of trading.

Additionally, Expected Move Consumption measures how much of this expected movement has already been realized during the trading day.

Both values can be used in OptionsApp as either an Entry Condition or an Exit Condition. These conditions are applicable to all Underlyings. In this article, we'll use SPX as our example.

2. Expected Move - Economic Significance

Economically, the Expected Move is based on the so-called ATM Straddle.

An ATM Straddle is a combination of a Call and a Put, both At-the-Money. Both expiring on the current day. The buyer of such a Straddle profits when the market moves strongly - regardless of direction.

The price of this Straddle therefore directly reflects what movement the market expects.

If a Straddle costs, for example, $44.55, it means:
The market expects the SPX to move approximately in this magnitude during the course of the day. If the expected movement were significantly lower, the Straddle would be too expensive and would not be purchased.

Statistically, a clear pattern emerges:
On approximately 85% of days, the SPX moves less than the Straddle price. In these cases, the seller of the Straddle profits. On approximately 15% of days, there are larger movements than expected - these days are often referred to as Expansion days.

3. Calculation of Expected Move

The Expected Move is calculated from the prices of At-the-Money options.

EM = \frac{ATM Put Premium + ATM Call Premium}{SPX}

The value can be interpreted in either points or percentage. In practice, the percentage representation is often used since it is better for comparing different market phases.

4. Example: Expected Move on SPX

Assume the SPX is at 7002 points at market open.

Since the SPX is quoted in 5-point increments, the nearest Strike is used, in this case the 7000 Strike.

For this example, the following values apply:

The ATM Call has a price of $18.50.
The ATM Put has a price of $16.50.

The sum is thus $35.

This corresponds to an Expected Move of approximately 35 points or roughly 0.5%.

This means:
The market expects a movement of approximately plus/minus 0.5% on this day.

Importantly:
The Expected Move does not specify a direction. It describes exclusively the magnitude of the expected movement, not whether the market rises or falls.

5. Time Dependency of Expected Move

The Expected Move changes during the course of the day.

An example:
At 09:32 AM, the Expected Move could be 0.6493%.
At 12:00 PM, the same value could have already fallen to approximately 0.40%.

The reason for this is the remaining time until the close of trading.

As time decreases, the possible movement also decreases. This makes the Straddle cheaper and the Expected Move falls accordingly.

For this reason, the Expected Move is typically fixed shortly after the market opens, for example at 09:32 AM (US time). This value then serves as a reference for the expected movement for the entire day.

6. Using Expected Move in OptionsApp

The Expected Move can be used to control strategies based on the expected market movement.

A typical use case is to open Trades only when a sufficiently large movement is expected.

Example in points:

The Underlying is set to SPX.
The Condition is set to Expected Move.
The unit is set to Points.
The operator is set to greater than or greater than or equal to.
The Threshold is set to 20.

This means that a Trade is opened only if the Expected Move is above 20 points.

Alternatively, the Expected Move can also be used in percentage.

Example:

The Underlying is set to SPX.
The Condition is Expected Move.
The unit is set to Percentage.
The operator is greater than or equal to.
The Threshold is set to 0.50.

In this case, a Trade is opened only if the expected movement is at least 0.5%.

The Expected Move can be used as either a filter or a trigger. When used as a trigger, the condition is continuously checked and triggers as soon as it is met.

7. Expected Move Consumption - Definition

Expected Move Consumption describes how much of the expected daily movement has already been realized.

The actual movement since the market open is compared to the originally expected movement.

EMC = \frac{Intraday Movement}{{EM}_{open} \times {SPX}_{open}} = \frac{| SPX - {SPX}_{open} |}{{EM}_{open} \times {SPX}_{open}}

The calculation is based on absolute change, regardless of direction.

8. Example: Expected Move Consumption

At market open, an Expected Move of 0.5% is determined with the SPX at 7002. This is an expected movement of approximately 35 points.

If the SPX then rises by 17.5 points to 7019.5 points, the following situation results:

EMC = \frac{Intraday Movement}{{EM}_{open} \times {SPX}_{open}} = \frac{| SPX - {SPX}_{open} |}{{EM}_{open} \times {SPX}_{open}} = \frac{| 7019.5 - 7002 |}{0.5 % \times 7002} = \frac{17.5}{35} = 0.5 = 50 %

This results in an Expected Move Consumption of 50%.

This means that half of the expected daily move has already been realized.

You can also calculate it more simply:

EMC = \frac{actual move}{expected move} = \frac{17.5}{35} = 0.5 = 50 %

9. Interpreting Expected Move Consumption

Expected Move Consumption allows you to assess the current market movement.

If the value is below 100%, the expected move has not been fully realized.
If the value is around 100%, the expected move has been reached.
If the value is above 100%, the market is moving more than originally expected.

Important:
only absolute values are used. The direction of the move doesn't matter. That's why only positive values make sense.

10. Using Expected Move Consumption in OptionsApp

Expected Move Consumption can be used for both Entry and Exit logic.

For example, it would be possible to close trades when a certain portion of the expected move has already occurred.

Example:

Set the Underlying to SPX.
Select Expected Move Consumption as the Condition.
Set the Delay to, for example, 2 to 3 minutes.
Set the Operator to greater than or equal to.
Set the Threshold to 50.

This means a trade will be closed as soon as at least 50% of the expected move has been reached.

11. Significance of the Delay Parameter

The Delay parameter determines the point in time at which the Expected Move is set as the reference value.

Immediately at market open, not all necessary options data is often available yet. For this reason, it can make sense to use a short delay of just a few minutes.

A typical setting is 2 to 3 minutes after market open.

Alternatively, you can choose a later time, such as one hour after market open, to use the expected move as a reference at a different point in time.

12. Summary

Expected Move describes the market's expected move for the current trading day and is based directly on prices of 0DTE At-the-Money options.

Expected Move Consumption shows how much of this move has already occurred.

Both metrics are direction-neutral and are particularly useful for assessing market volatility and controlling Entry and Exit timing in OptionsApp.