Implied Volatility

Implied volatility (IV) is a percentage representing the market's collective estimate of how much a stock's price is likely to swing — up or down — over the life of an option. It's a forecast of the size of future price movement, not its direction, and it's baked directly into every option's premium: higher IV means a richer premium, because the market is pricing in a wider range of possible outcomes. IV rises heading into known sources of uncertainty, like an earnings report, and typically drops sharply once that uncertainty resolves — a pattern often called "IV crush." High IV benefits option sellers, who collect a larger premium for taking on the same obligation, but it also signals the market expects a genuinely larger move, including to the downside. Implied volatility describes a range of uncertainty; it says nothing about what actually happens within that range.