Implied Volatility Definition

Implied volatility is the market's expectation of future price fluctuations, derived from options pricing.

What is Implied Volatility?

Higher implied volatility generally reflects greater uncertainty and typically increases options premiums.

It differs from historical volatility, which looks at past rather than expected price movement.

Options on a stock ahead of an earnings announcement often show elevated implied volatility.

An illiquid market is one where assets cannot be easily bought or sold without significantly affecting the price.

An index is a statistical measure representing the performance of a group of assets, such as stocks, used to track a market or sector.

An index fund is a fund designed to track the performance of a specific market index.