When trading earnings, you need to know more than just direction — you need to know how far a stock is expected to move. That’s where the expected move comes in.
It’s one of the most powerful tools available for short-term option traders looking to play earnings without guessing blindly.
Take Constellation Brands (STZ) as an example. The stock had one of the worst-looking charts out there, but earnings trades aren’t about charts — they’re about expectations.
The market was pricing in a $9 move in either direction. That created a very specific range: high end around $176, low end around $157.
With that range in mind, the question becomes: How can you structure a trade that profits if the stock moves as expected?
Use the Expected Move to Set Your Strikes
Instead of buying a naked call or put, one strategy is to use a tight call spread that stays inside the expected move window. For STZ, a 175/177.50 call spread could be had for around 50 cents.
If the stock moved just modestly above $175, the spread would return 5-to-1.
That’s the advantage of working within the expected range — you don’t need a massive breakout to hit your max profit. You’re simply trading around the projected volatility.
The best part? These setups give you defined risk. In this case, risk $50 to potentially make $250 if the stock closed just over $177.5. It’s a tactical way to bet on direction while letting the options market define the bounds.
Most traders lose on earnings because they bet big on direction without understanding the size of the move priced in. The expected move changes that. It gives you a roadmap.
Use it to pick smarter strike prices, avoid overpaying and frame trades with better risk-reward. Earnings don’t have to be a gamble — not if you let the market show you the range first.
Lance Ippolito Trading Team
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Every Trader Should Be Leveraging This 1 Daily Setup
I’ve been playing the market with this simple daily setup since February.
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