Implied volatility (IV) is the option market's forecast of how much a stock will move in the future, expressed as an annualized percentage. Higher IV makes options more expensive; lower IV makes them cheaper. IV is forward-looking, derived from option prices via the Black-Scholes model. Compare IV to historical volatility to assess option pricing — if IV is much higher than historical, options are pricey; selling premium is favorable. IV typically spikes before earnings announcements ('IV crush' after) and during market crises. The VIX index measures implied volatility on S&P 500 options — the 'fear gauge' of the market.
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Implied Volatility
August 22, 2026 · Aditya Gupta
Investing
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