Explain the Concept of “Implied Volatility” in Options and Its Relation to Market Volatility

Implied volatility (IV) is a forward-looking measure derived from the option's market price, representing the market's expectation of future price swings. High IV suggests the market anticipates high future market volatility.

While market volatility (historical price movement) is backward-looking, high IV often correlates with wide bid-ask spreads in options. This wider spread increases potential slippage, as the cost of immediate execution is higher due to the perceived risk.