Understanding Implied Volatility
Implied volatility (IV) represents the market's expectation of future price movement. Higher IV means options are more expensive, while lower IV means they're cheaper.
Key IV Metrics:
- IV Rank: Current IV compared to 52-week range (0-100)
- IV Percentile: Percentage of days IV was lower in past year
- Historical Volatility: Actual past price movement
How to Trade with IV
Professional traders use IV to:
- Identify overpriced options (sell when IV is high)
- Find underpriced options (buy when IV is low)
- Time entries around earnings and events
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