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Welcome to your source for answers to questions about option concepts, strategies, and terminology. A new question and answer is published each week. To view the Ask the Institute archives, click the "Ask the Institute Archive" link below.

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This week's question:

DATE: April 24, 2015

QUESTION:
Is there a general rule of thumb when using the price of a straddle to estimate the expected stock price range?

ANSWER:
There is a formula that converts the stated volatility percentage, which is the annual standard deviation of stock price movement, to a period of time chosen by the trader. To learn more about how, as a general rule, this formula can be applied to estimate the expected stock price range using the price of a straddle, view this segment of "Ask the Institute."

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