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IV Implied Volatility

VolatilityHow much movement is being priced in?

The market's forecast of how much the stock will move, backed out of the option's own price. It is the input that makes premium rich or thin — and the one most worth understanding.

Where you see it: Every screener row, every option-chain row, the Assign tooltip, and the brief.

What it measures

Every other input to an option's price is observable: the stock price, the strike, the time remaining, interest rates. Volatility is the one that is not, so it is solved for. Implied volatility is the volatility figure that makes the pricing model output the price the option is actually trading at. It is a forecast expressed as an annualized percentage.

An implied volatility of 40% means the market is pricing roughly a 40% annualized standard deviation of returns — about a 68% chance the stock finishes within ±40% of where it started a year out, loosely speaking. Scaled to a month it is far smaller.

The number that matters to a seller is the gap between implied and realized volatility. Implied is the forecast; realized is what the stock actually did. Implied usually sits above realized, and that persistent gap is the structural edge in selling premium — buyers pay for protection and convenience, sellers collect the difference.

earningsimpliedrealizedtimevolatility
Implied volatility (the bright line) is a forecast; realized volatility (the faint line) is what the stock actually did. Implied usually sits above realized — that gap is the premium seller's edge. It widens into a known event such as earnings and collapses immediately afterwards, which is the 'IV crush' that repays a short-volatility position even when the stock barely moves. Illustrative.

How to read it

High implied volatility means richer premium and a wider expected range. It is not a directional signal: elevated IV says the market expects movement, not which way.

IV inflates ahead of scheduled events and collapses after them. A reading taken across an earnings print describes the event, not the opportunity — which is why the platform holds names reporting within the contract period out of its top candidates.

IV is not comparable across stocks in raw form. 40% is rich for a utility and cheap for a biotech. That is exactly the problem IV Rank solves.

Using it on the wheel

Implied volatility is what you are actually selling. The premium in the contract is compensation for taking on the movement the market expects, and a seller's return comes from that expectation exceeding what happens.

For any strike, higher IV means a bigger credit at the same delta — or the same credit at a further-out strike. That is the practical lever: elevated volatility lets a seller stand further from the money for the same money.

The comparison worth making is IV against the stock's own realized volatility. Premium that is high in absolute terms but lower than what the stock actually delivers is not rich; it is underpriced risk. IV alone cannot tell you which you are looking at.

The IV and IV Rank figures are always published together on this platform, in that order. Either one alone misleads: IV without its rank has no context, and a rank without the level hides how much premium is actually there.
Elevated IV is often elevated for a reason. A name with unusually rich premium frequently has something specific pending, and the premium is the market's price for that uncertainty rather than a mispricing.
On this platform IV is solved from each contract's last traded price, not from a live bid/ask. On an illiquid contract that trade can be hours old, so the IV describes a stale underlying. See Data quality for how that is guarded.

Like everything in this guide, these are descriptions of conditions and reference levels — context for your own decisions, not instructions to trade.

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