Explain the Concept of “Implied Volatility” in Option Pricing

Implied volatility (IV) is a forward-looking measure derived from the current market price of an option. It represents the market's consensus expectation of the underlying cryptocurrency's future volatility over the life of the option.

Unlike historical volatility, IV is not based on past price movements. High IV suggests the market expects large price swings, leading to higher option premiums.

It is a crucial input in option pricing models.