Questions tagged [implied-volatility]

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.

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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 * ...
126 views

Crash O Phobia and the reason for higher pricing of out of the money puts

In my stochastic finance course we are currently talking about Implied Volatility and Crash O'Phobia. According to Rubinsteins Crash O'Phobia, put-sellers attach a higher probability to the left tail ...
141 views

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 ...
293 views

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 ...
253 views

Why does increased volatility always mean higher call prices?

I understand that apparently implied volatility of a call option increases as the underlying price of the stock deviates further and further from the moving average. That mostly makes sense, because ...
457 views

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?
325 views

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 ...
1k views

How liquid is options market?

My strategy invloves making profits by the increase in "Implied volatility" through long straddles/strangles. Enemy: Time decay. I am aware that the time decay accelerates. I read, For a 9 month ...
133 views

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 ...
108 views

What is the skew of a volatility smile?

My book says that the skew of an implied volatility smile is the slope of the curve. But then it says that the skew is 0.25 %, i.e., if K goes DOWN 1, implied volatility goes UP 0.25 %. However, ...
757 views

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?
638 views

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 ...
720 views

How to read an implied volatility percentile chart

In this free source of volatility data, there is a column Days/Percentile. How to interpret this? It says: Days:the number of days back for which implied volatility has been calculated Percentile:...
431 views

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 ...
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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) ...
742 views

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 ...
168 views

Does Black Scholes exhibit the volatility smile?

You often hear about the volatility smile. Is that something that occurs within a standard Black Scholes model, with the usual formula for the price of a call? If we were to observe some call price (...
912 views

Does implied volatility always rise as earnings announcements approach?

Often, implied volatility of options rise as an earnings announcement approaches. Does this principle hold true regardless of whether the earnings are expected to be good or bad? Also, usually IV and ...
35 views

Implied volatility vs implied pdf

Good morning. I'm trying to download the implied volatility for at-the-money options on Eurodollar future 3 month. Is there some way to find it? Can it be calculated from the probability distribution ...
140 views

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 ...
113 views

If Implied Volatility is calculated on a per option strike basis, how do stocks have IV?

My broker shows Implied Volatility for a stock, but as I understand the BS model, it's calculated on a per option basis. So how is it shown for the entire stock?
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Options Volatility and Settlement during a merger and acquisition

I'm trying to figure out how the vol of an option on a target change when the deal is a mix of cash stock. We know that in a cash deal, vol creeps to 0 as the deal collects approvals. Stock deal, vol ...
131 views

How can I affect implied volatility of an option?

Implied Volatility represents the actual above-market premium an option contract trades for at any point in time, but it changes in mysterious ways. If I wanted implied volatility to be higher, could ...
218 views

Setting up a delta-neutral position with Out of the money options

I am setting up a delta-neutral position using options only. My goal is to trade implied volatility having always a delta-neutral position. My question is, is there any difference if I do it with at ...
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When using the VIX index, is it similar to calculating volatility?

Im trying to understand the VIX Index, it gives the implied volatility of the S&P500. Now if I was to calculate the volatility of the S&P500 using standard deviations of the returns over a ...
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Online service that computes implied volatility [closed]

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 ...
953 views

How to see an option chain's implied volatility skew

Are there any inexpensive tools, web-sites or services you know of where one can see: a) current implied volatility skew for an option chain b) historic implied volatility skew Thanks
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How to calc profit and loss on vol listed options

CME lists vol quoted USD-EUR options. I can tell they are incredibly illiquid (there are no quotes listed) but how would these settle? If I bought on a 7 vol how would I know if I made money? Here is ...