Calculation and mechanics
The straddle price is the sum of the prices of the at-the-money call and put. At expiration, the break-even points of a long straddle lie roughly at the strike plus or minus the total premium paid.
Under simplifying model assumptions, the expected absolute move for normally distributed returns is around 80% of one standard deviation. The straddle price and an expected move of one standard deviation are therefore not the same quantity.
For ETFs with wider strike spacing, the at-the-money strike rarely sits exactly on the current price. The straddle is then built from the nearest available strike of the respective expiration.
Straddle price = ATM call price + ATM put price
Distinction
In Foliograph, the expected move is a one-standard-deviation move throughout, derived from straddle prices or, as a fallback, from the implied volatility. The ATM straddle, by contrast, is the absolute move read directly off option prices, which is converted first for the cone. The two quantities are closely related but not identical.
Related terms
- Expected Move (EM, one standard deviation move)
- Implied Volatility (IV)
- IV Term Structure (Volatility Term Structure)
- Expiration (Expiry)
- Option Strategy (Spread, Iron Condor, Covered Call)
All market and analytical information is provided for educational and analytical purposes only and does not constitute investment advice or a trading recommendation.