The implied volatility of an option contract is that value of the volatility of the underlying instrument which when input in an option pricing model such as Black–Scholes will return a theoretical value equal to the current market price of the option.
Questions tagged [implied-volatility]
54 questions
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How is options implied volatility for a stock determined?
For any given stock in Interactive Broker's TWS (and I bet with any other broker), there is an option's historical volatility and an option's implied volatility. I know the historical volatility is the annualized standard deviation of the stock. But…
Luis Cruz
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How can I be short volatility on a stock without getting exposed to moves in the underlying?
Given the current high volatility situation I'd like to benefit by deploying my mostly conservative portfolio in making bets that are short volatility. In particular some stocks like GME and BB and EXPR are hitting 500%+ implied volatility. I would…
David Karam
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How companies choose earnings release dates, & effect on Implied Volatility
A company's earnings release date significantly affects weekly or monthly option prices and implied volatility. For companies that typically release earnings on the cusp of monthly options expiration - either a few days before expiration or a few…
Ray K
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Implied or historical volatility to calculate theoretical options price with black scholes?
According to the black scholes model, volatility is one of the variables to calculate the fair price of an option. However, it doesn't specify which volatility should I use. Should I take the annualized standard deviation or should I use the implied…
Luis Cruz
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Is this the right formula to use implied volatility to gauge probability of a stock being within a certain range?
I read online somewhere, and I can't find it now, that to find the probability of a stock hitting a certain price within a certain time frame, we can use Implied Volatility:
X = StockPrice * IV * SQRT(DaysTillExpire / 365)
X would then be 1…
Shamoon
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Meaning of IV for a strike
As I understand it, IV is defined as an annualized 1 standard deviation range for an underlying. So what is the meaning of implied volatility for a strike?
The IV on each strike is calculated by inputting the market price of the option into the…
oceanus
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How exactly is implied volatility assigned to an option's strike price?
I'm trying to understand implied volatility (IV) better. Recently, I was looking at $YUMC's option chain (date: 07/10/2017) and in particular the 27.5 strike price with an IV of 0%.
I'm trying my best to understand why the 27.5 strike price has an…
HappyTurtle
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How accurate is Implied Volatility in predicting future moves?
As I understand it, IV give the range the stock is likely to move within a year (to one standard deviation).
Is this accurate? Are there any studies showing the accuracy or lack there of IV?
Shamoon
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Options price vs implied volatility - who drives who?
In this article we have:
In contrast, IV is derived from an option’s price and shows what the market “implies” about the stock’s volatility in the future. Implied volatility is one of six inputs used in an options pricing model
The first line says…
Victor123
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Picking a hedge option
In picking a hedge option, how important is it to buy one where the implied volatility isn't much higher than actual market volatility? Should one look at the option chain and find those options that have the best price in terms of implied…
Ray K
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Ballpark range for an IV Crush
I would love to enter a few options trades but have learned (the hard way) that moves from high to low IV can mess the returns even when calling the right direction of the move. This is explained in more detail
here
I want to be able to estimate…
David Karam
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Does sigma in Black-Scholes attempt to take into account future events?
I am learning basic information about Black-Scholes wrt options pricing.
I see that the standard deviation of the stock price is taken into account. This seems to only rely on existing (historical) data. The formula does not seem to take into…
Ken - Enough about Monica
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What's overnight volatility?
https://www.ig.com/uk/view-ig/2016/09/20/the-central-bank-fest-ramps-up-34452
In the FX market, USD/JPY is the pair to watch through Asia today, with the options market showing implied overnight volatility at 35.00. There have been bouts in April,…
makeowe
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Why IV and stock price are inversely related
What is the reason that Implied Volatility and Stock Price are inversely related?
Is it possible to understand this qualitatively without getting into the math of the Black-Scholes formula?
Victor123
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Online service that computes implied volatility
Is there a free online service that will give me the Implied Volatility of a stock or ETF based on the current option price? Or do I need to calculate myself in excel? I found this resource on IV
but this list is pre screened based on certain…
Victor123
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