Implied volatility
Also called: IV
The volatility that, put into an option pricing model, gives an option's current market price. It reflects expected movement.
Higher implied volatility means higher option premiums. It says nothing about direction. It often rises when markets fall and drops sharply after scheduled events such as results, which can hurt option buyers even when the price moves their way.
Example
At 30% implied volatility, a ₹1,000 share has a rough one-standard-deviation range of about ₹86 over 30 days.
Learn more in these lessons
- Historical and implied volatilityWhat is implied volatility, and why does it matter so much for option prices?
Related terms
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