Introduction to Implied Volatility

Implied Volatility is the wildcard in Options pricing. Most newcomers to Options tend to ignore it, and often pay a costly price.

Implied Volatility

Implied Volatility is the "wildcard" in Option prices. Ignore it, and you will pay a price. In fact, it's so important we have at least four different varieties - Volatility, Implied Volatility, Historical Volatility, and Future or Expected Volatility. We use our real-world examples to explain the concept of Volatility in simple terms. Then we study how Volatility is quantified in Stocks and Options. And how Volatility finds a back-door to embed itself into Option prices. Implied Volatility considerations are critical when choosing between a buyer and seller profile. We break this complex topic down into simple terms and show you an example of NFLX and CAT options that should make it absolutely clear what this is all about.

What you will master

  • How are Option prices determined and is there an unknown variable
  • Why is it difficult to calculate or determine Implied Volatility of an Option
  • Why is this called "implied"
  • How does Implied Volatility manifest itself into Option prices
  • Why is it the "wildcard" in Option prices
  • Understand a real world example of Volatility
  • What is the relationship between Option prices and Implied Volatility
  • How should buyers and sellers look at Implied Volatility
  • Does IV work differently for buyers and sellers
  • Are some strategies better for high volatility situations
  • How can we observe Implied Volatility in real Option prices

Intended Audience: Options Beginner

Implied Volatility - I
Implied Volatility - II

What's included

  • 2 Video Lessons

  • Works on all devices
  • Certificate of completion

Hari Swaminathan

Instructor