How Does Implied Volatility (IV) from Token Options Influence an Investor’s Valuation Assumptions?

Implied volatility (IV) is the market's expectation of future price volatility, derived from options prices. High IV suggests the market anticipates large price swings, indicating a significant divergence between the current market price and the perceived intrinsic value.

If an investor's valuation is significantly higher than the market price, high IV suggests the market agrees a move is likely. It influences the risk premium used in DCF and the probability distribution in a Monte Carlo simulation.

IV is a key input in the Black-Scholes model.