July 26, 2019

What Does Implied Volatility Tell Us About A Stock and How Do We Use It

Implied volatility is a metric that captures the market’s view of the likelihood of changes in a given security’s price. Investors can use it to project future moves and supply and demand, and often employ it to price options contracts.

Implied volatility is not the same as historical volatility, also known as realized volatility or statistical volatility. The historical volatility figure will measure past market changes and their actual results.

Click the video below to see why implied volatility is so important and how we use it:

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about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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Understanding the Delta of an option is crucial for both new and seasoned traders. It’s one of five specific calculations called “Greeks,” which help measure specific factors that could influence the price of an options contract. Delta is a metric that helps you gauge how much the value of an option contract is expected to […]

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