Implied volatility
IVimplied vol
The volatility input that, fed into a pricing model, reproduces the option's market price — a forward-looking volatility expectation.
IV expands during stress and compresses in calm regimes. The IV surface (strike × expiry) reveals skew (puts > calls in equities) and term structure (front-end vs. back-end). Stablecoin-yield strategies that sell options harvest the typical IV-RV spread (markets price more vol than is realised, on average).
Related terms
- Realized volatilityThe actual volatility experienced over a backward window — the empirical counterpart to implied volatility.
- Volatility surfaceA 3D plot of implied vol across strike + expiry — the canonical view of how the market prices forward risk.
- OptionA derivative giving the holder the right (not obligation) to buy ([[call-option]]) or sell ([[put-option]]) at a fixed price by expiry.