implied volatility tells you

Implied volatility (IV) = option price / Black–Scholes model

Implied volatility is a forward-looking measure that differs from historical volatility, which is based on past returns.

Implied volatility is used in option pricing models like Black–Scholes to determine the theoretical value of an option.

Ranked IV helps understand its volatility compared to historical highs and lows.

Example

If an option is priced at $10 and the Black–Scholes model suggests an IV of 20%, then the implied volatility is 20%.

Remember this

Understanding IV helps investors gauge market expectations for future price movements.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

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Educational content, not financial advice.

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