Expected Move Bias: How Far can Prices Go
Update: 2025-08-12
Description
A market measure segment discussed expected move bias, examining how implied volatility compares to realized moves across different time frames. Data spanning 25 years revealed that 45-day options consistently show expected moves exceeding realized moves, explaining tastytrade's preference for this timeframe in their trading mechanics.
The analysis showed 45-day options offer optimal balance between P&L potential and consistent volatility overstatement compared to shorter or longer-dated options, providing strategic advantages for traders seeking to maximize occurrences.
The analysis showed 45-day options offer optimal balance between P&L potential and consistent volatility overstatement compared to shorter or longer-dated options, providing strategic advantages for traders seeking to maximize occurrences.
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