12 Minute Read

Tales of a Technician: How to use the Thinkorswim Market Maker Move Tool

December 11, 2017

By | 3 Comments

Learn how to trade on Thinkorswim like a PRO! Try Tackle Trading FREE for 15 days.

Last update: June 2021

Prepare for a revelatory experience, one that will make you wonder at the wisdom of the crowd and the efficiency of markets. One of the inputs to pricing an option is volatility. Think of it as how much you expect the underlying stock to move. If you expect it to move a lot, then the option price will be high. If you expect to move a little, then the option price will be low.

Said another way, if you know volatility, then you can solve for an option’s premium. And it works in reverse too. If you know an option’s premium, then you can solve for volatility. That is, you can figure out what the expected volatility is based on an option’s premium. Here’s an example:

Stock XYZ will exhibit 30% volatility over the next month. Knowing that information, I can calculate that its one-month, at-the-money call option should be priced at $5.00.

The one-month, at-the-money call option for stock XYZ is trading for $5.00. That implies that the stock will exhibit 30% volatility over the next month.

Key takeaway: you can look at an option’s premium to determine just how volatile the stock is expected to be.

Who sets the option’s premium?

Buyers and sellers, otherwise known as supply and demand. And while one or two traders may be foolish dunderheads, the market in aggregate is pretty good at estimating how volatile a stock is going to be. That means that most of the time option premiums do a respectable job at forecasting how much a stock will move.

If we’re splitting hairs, the market typically overestimates how much a stock is going to move, but that’s a story for another day.

Now, why is knowing how much a stock is expected to move helpful? Well, for a ton of reasons.

A) It can help you place your stop loss a reasonable distance from the current price.

B) It can help you spot price moves that are abnormal or outliers.

C) It can help you decide which strike prices to use when selling options. For example, you can make a bet that the stock won’t move more than expected by selling options with strikes outside of the forecasted range.

The Market Maker Move (MMM) typically shows up before an earnings release and identifies the expected range a stock should trade in with the earnings gap. For example, Costco, which reports earnings on December 14th (this Thursday) has a MMM of $7.33.

MMM: Market Maker Move

That means based on current option premiums, the expected range for COST is $7.33. We can add/subtract that to its current stock price ($188.86) to get an idea of what that looks like on the price chart.

As shown below the upper end of the expected move is $196.19, and the lower end is $181.53.

$COST: Expected Range.

In case you’re wondering, that doesn’t mean there is a 100% chance that COST will remain in this range through earnings. It represents a one standard deviation move. Essentially there is a 68% chance Costco will sit in the range. That’s the confidence interval. So, if options are correctly priced, and you were to bet that COST would stay in the expected range for the next 100 earnings announcements, you would be right about 68 out of 100.

Do you have to wait until the Market Marker Move feature shows up at the top of your option chain to discover this information?


It’s already displayed for each expiration cycle. That’s what all those numbers are on the right side of the chain. The percentage is the implied volatility for that period, and the number in parenthesis is the expected move higher/lower between now and then. So, for example, the Jan monthly (19 Jan 18) that expires in 39 days has an implied vol of 23.37% which translates into an expected range for COST of up/down $11.62. That means if you were going to sell a bull put spread and wanted to be outside of one standard deviation then you would need to make sure your strikes were at least $11.62 below the current stock price ($188.86).

Tackle Trading Tutorials on Thinkorswim

Thinkorswim is the most popular trading platform in the entire market. Tackle Trading has all the resources you need to MASTER Thinkorswim like a PRO.

Thinkorswim Tutorials [Free Videos]

Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

3 Replies to “Tales of a Technician: How to use the Thinkorswim Market Maker Move Tool”

  1. terrywallen says:

    Good job Tyler. Very clear explanation of how to apply an important variable.


    Thanks Tyler. I knew those numbers on the right must mean something 🙂

  3. asianraisin says:

    thanks for taking time to write this! very helpful. i’ve just one question though…you wrote:

    Stock XYZ will exhibit 30% volatility over the next month. Knowing that information, I can calculate that its one-month, at-the-money call option should be priced at $5.00.

    The one-month, at-the-money call option for stock XYZ is trading for $5.00. That implies that the stock will exhibit 30% volatility over the next month.

    can you please explain how the 30% volatility is related to the one-month, at-the-money call option being priced at $5.00?

Comments are closed.

Chart Modal

Tackle Trading

Book a FREE Consultation

Sign up for a free consultation to build your Educational Plan.