Hey guys, i heard various guys saying that the ATM Straddle is the range of the expected move of the stock the market makers are pricing. Some say it's 0.8*ATM Straddle. Can someone clarify the doubt what is the expected range of a stock given the straddle.
Posted by TradingBulls07
1 Comment
Usual “rule of thumb” is 85% of the straddle or 50% of the sum of the straddle and the one strike OTM strangle. These are just so called back of the envelope estimates that floor traders used to use to get a quick idea of what the options market is pricing in for a stock. Same method could be applied to any ticker.
FYI your usage of ATM is kind of redundant. A straddle refers to the ATM options.