Volatility
Implied Volatility (IV)
Also called: IV, implied vol
Implied volatility is the market's forecast of how much an underlying will move, expressed as an annualized percentage and backed out of current option prices with a pricing model. Higher IV means options are priced for larger swings and cost more.
Unlike historical volatility, which measures what price did, implied volatility measures what option prices expect. It is the one Black-Scholes input that cannot be observed directly, so traders solve for it: given the option's market price, strike, time to expiration and interest rate, IV is the volatility that makes the model price match the market. Every strike and expiration has its own IV, which is why a single ticker shows a volatility skew and a term structure.
IV converts to a move size by dividing by the square root of the number of periods per year. A 32% annual IV implies roughly a 2% one-standard-deviation daily move (32% / √252). IV is mean-reverting: it rises into earnings and macro events and collapses after them ("IV crush"), so comparing current IV with its own history through IV rank and IV percentile matters more than the raw number.
Formula
Daily 1σ move ≈ IV / √252 · Expected move over T days ≈ Price × IV × √(T / 365)
Example
A stock at $100 with 30-day IV of 40% implies a one-standard-deviation move of about $100 × 0.40 × √(30 / 365) ≈ $11.47 over the next 30 days.
See it live
Frequently asked questions
Is high implied volatility good or bad?
Neither. High IV means options are expensive relative to the ticker's usual pricing, which favors option sellers and makes buyers pay more for the same exposure. It also signals that the market expects a large move, often around a scheduled event.
How is implied volatility different from historical volatility?
Historical (realized) volatility is computed from past price changes. Implied volatility is derived from current option prices and reflects expected future movement. When IV sits well above HV, options are pricing in more movement than the stock has recently delivered.