Implied volatility
Volatility inferred from option prices, reflecting the market's priced magnitude of future moves.
Plain languagePractical exampleConnected reading
01
What is it?
Volatility inferred from option prices, reflecting the market's priced magnitude of future moves.
02
Why does it matter?
It is a core input into option premium and expected-move estimates.
03
How should it be read?
Compare like maturities and strikes, and remember it is not a directional forecast.
04
Common mistake
Treating high implied volatility as a certain bearish forecast.
A simple example
Implied volatility may rise before earnings and fall afterward regardless of price direction.