Implied Volatility | Options Strategies

Implied volatility (IV) is the market's forecast of a likely movement in a security's price. A higher IV means higher expected volatility of a security’s price.

The implied volatility of a security is not directly observable but derived from a range of other factors like supply-demand, time, past volatility, etc.

IV is often used to price options contracts, where high implied volatility results in options with higher premiums and vice versa.

Options trading with high implied volatility levels are preferred by option sellers while those trading with low implied volatility levels are more attractive to option buyers.

The rise and fall of implied volatility determines the success of an options trade. A higher change in implied volatility means a larger move in premiums.

Note that implied volatility is just one of the factors you should consider while trading in options.

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