Hey,

Quick one this week, because it saves people real money every earnings season.

Your broker shows an expected move before earnings. Plus or minus 8%. Almost everyone reads that as a prediction of where the stock is going. It isn't. It's the options market admitting it doesn't know, and putting a price on its own uncertainty.

Here's the whole thing in one example. Stock at $100. The nearest straddle - buying the $100 call and the $100 put - costs $8. That $8 is the expected move. Plus or minus 8%. It's not an analyst survey. It's just a price.

And that price is roughly one standard deviation. So the market is saying: about a 68% chance the stock finishes between $92 and $108 by expiration. Which means a full one-in-three chance it finishes outside that band. When a stock gaps 12% and everyone acts shocked, the options market wasn't wrong. It told you that happens a third of the time.

The handle I want you to keep: the expected move is a band of ignorance, not a bullseye.

One more thing that traps people - implied volatility is inflated before earnings, then collapses the moment the news drops. The IV crush. You can be right on direction and still lose on a long call because the volatility you overpaid for evaporated.

What a disciplined trader does: before any earnings trade, find the expected move and ask one question - do I think the stock moves more or less than this band? Then compare it to how the stock has actually moved on past earnings. If it usually moves 5% and the market prices 10%, options are rich. That single question kills most bad trades, because usually you have no edge on it.

This is educational commentary, not personalized financial advice - just the mental model I use.

Full breakdown, with the numbers on screen, here: https://youtu.be/xquWJPwt6Rg

Size risk like an adult.

• Paragon