What Is Implied Volatility in Options?

Implied volatility (IV) in options trading is a metric that reflects the market’s expected future volatility of the underlying asset. It’s inferred from the prices of options on the purchase. A high IV indicates that the market expects large price swings, while a low IV suggests more minor price changes are anticipated. It’s crucial for pricing options, as it can impact the premium paid or received when trading options. It does not predict the direction of the price change.

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