Equation to calculate the expected move of an underlying:
1SD move = Price x IV x 5%
2SD move = Price x IV x 10%
Example of 1 day move in SPY: Price = 183.02, IV = 15%:
183.02 x 0.15 x 0.05 = $1.37 (1SD move)
183.02 x 0.15 x 0.10 = $2.75 (2SD move)
Thursday, February 20, 2014
TT - GC: Cheater Math, 02/20/14
Equation to calculate the expected move of an underlying:
1SD move = Price x IV x 5%
2SD move = Price x IV x 10%
Example of 1 day move in SPY: Price = 183.02, IV = 15%:
183.02 x 0.15 x 0.05 = $1.37 (1SD move)
183.02 x 0.15 x 0.10 = $2.75 (2SD move)
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