Choose a consistent snapshot
Use a pre-event stock price and an at-the-money call and put with the same strike and an expiration after the announcement. Record the timestamp. Combining a stock price from one session with stale option quotes from another creates a misleading percentage.
Work through the arithmetic
With a $100 stock, a $4.20 call, and a $3.80 put, the combined premium is $8 per share. The 100% convention produces an 8% range around spot, from $92 to $108. A deliberately selected 85% convention produces 6.8%. Neither convention guarantees that the stock will stay in the range.
Range is not directional
Both a large rally and a large decline may matter to a straddle. The estimate describes a magnitude rather than a bullish or bearish view. Bid-ask spreads, dividends, interest rates, and non-event time value also affect premium.
Keep expiration breakevens separate
The long-straddle expiration breakevens use the shared strike plus and minus the entire premium paid. These are not automatically the same as a multiplier-adjusted move range around the stock price. Commissions and execution costs are additional.
Sources and further reading
This guide explains a tool and its assumptions. It is not personalized financial, tax, or legal advice.
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