Beating the priced move
Definition · Level 5 · Greeks & volatility
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Judging a straddle by comparing the move that actually happens with the move the straddle’s price implied, not with zero. A move smaller than the price loses money even if it feels big.
Example
Straddle 6.00, stock moves 2.40 → lose 3.60.
Where Tradecraft teaches it
Level 5 · Greeks & volatility, in the lesson “The straddle as the priced move”: Why the price of the at-the-money straddle is the desk’s shortcut for the expected move, and how it differs from one standard deviation.
Related terms
- Straddle approximationAt-the-money straddle ≈ 0.8 × S × σ × √T.
- 25-delta optionThe out-of-the-money call or put whose delta is ±0.25: the standard reference strike for quoting skew, and very roughly a 1-in-4 chance of finishing…
- Beta-weighted deltaA book’s delta expressed in index shares: delta × (stock price ÷ index price) × beta, summed over positions.
- Black–ScholesEuropean option-pricing model using spot, strike, time, rates, dividends and volatility; assumes lognormal prices, constant volatility, no jumps and…
- Black–Scholes inputsSpot price, strike, time to expiry, interest rate, dividends and volatility.
- Breakeven moveThe daily move in the underlying at which a delta-hedged option’s gamma profit just covers its time decay: √(2 × |daily theta in $| ÷ position gamma).