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Investment
Implied Volatility
The market’s forecast of how much a stock is expected to move up or down in the future.
Implied volatility (IV) is one of the most important factors in option pricing. High IV makes options more expensive. When the event passes and the stock doesn’t move as much as expected, IV usually drops and option prices fall fast (volatility crush).
It's the stock market's way of saying 'we think this stock is going to be really wild soon'.
Real world: Before an important earnings announcement, implied volatility on a stock’s options often jumps from 30% to 80% because traders expect a big price swing.
💡 Implied volatility tells you how nervous the market is about future price moves.