Core concept
Earnings implied move: what the straddle is telling you
A quick earnings implied move estimate divides the at-the-money straddle cost by the stock price. It is a planning shortcut, not a forecast.
Why traders use it
The straddle combines the cost of a call and put near the stock price. Because both sides benefit from a large move, the total cost can frame the size of move options buyers may need just to overcome premium paid.
Example
A $6 straddle on a $75 stock implies an 8% move by simple division. The rough range would be $69 to $81 before trading costs and changing volatility.
Limitation
Skew, expiration choice, dividends, rates, liquidity, and market maker adjustments can all distort a simple estimate.
Primary reading: OIC options pricing overview · OIC long straddle strategy · Investor.gov options overview