Implied Volatility is often used by investors to project future moves in the market and price options contracts. The term refers to a metric that captures the market's view of the likelihood of changes in a given security's price. By understanding how implied volatility is calculated, investors can better assess whether an option is over-or under-priced.So what exactly is implied volatility? In essence, it is the markets way of predicting how much a stock will move, up or down, in percentage terms over a certain period of time. This number can be useful for options traders because they can use it help determine if an option contract is currently priced correctly.
