Course · Act III: Theta Gang · Chapter 12
Options expected move and vega
The at-the-money straddle prices the move the market expects by expiration. Straddle breakevens, vega, who is long or short volatility, and why selling the move wins often and loses big.
Key terms
- Straddle
- A call and a put at the same strike and expiration. Long it to bet on a big move, short it to bet on a small one.
- Expected move
- The at-the-money straddle price: roughly how far the market expects the stock to move, either way, by expiration.
- Vega
- How much an option’s price changes when implied volatility moves one point. Owners are long it; sellers short it.
“The Expected Move” is part of the full course: 6 puzzles on options expected move and vega. RocketCo is fictional, and none of this is a trade. Try this act’s free chapter, “Covered Calls”, first.
“The Expected Move” is in Act III: Theta Gang. 6 puzzles, unlimited retries.
Go to chapter →