Define 'Implied Volatility' in Options Trading ▴ Learn

Define ‘Implied Volatility’ in Options Trading.

Implied volatility (IV) is the market's expectation of the future volatility of the underlying asset's price, derived from the current price of the option. It is a key input in option pricing models like Black-Scholes.

Unlike historical volatility, IV is forward-looking and reflects all market factors, including perceived risk and uncertainty. Higher IV means a higher option premium.

Explain the Concept of “Implied Volatility” in Option Pricing

What Is the Difference between “Historical Volatility” and “Implied Volatility”?

What Is the Relationship between Historical Volatility and Implied Volatility?

Explain the Difference between Implied Volatility and Historical Volatility