Implied Volatility
The volatility figure that makes a pricing model return the option's traded premium — the market's expectation of future movement, backed out of price.
Also called: IV · option IV · implied vol · IV crush
What it means
Implied volatility is not measured from history; it is inverted out of the current premium. Given spot, strike, time to expiry, rates and the traded price, it is the volatility input that reconciles model and market.
It is the dominant driver of premium for an option buyer alongside time decay. A correct directional view can still lose money if implied volatility falls enough after entry — the collapse after an expected event, commonly called IV crush, is the standard example.
IV varies across strikes and expiries. The shape of that variation — the smile or skew — carries its own information, and a single headline IV number flattens it away.
How OptionLab Pro’s engine uses it
In the live engine
We invert IV from the traded premium per leg with Black-Scholes rather than taking a vendor figure, so the number is reproducible from the chain. Averaging the call and put IV on the at-the-money row, dropping zero legs, gives the daily at-the-money IV snapshot that the IV Rank percentile is computed against.
go/internal/optionchain/greeks.go · go/internal/iv/The common mistake
Where traders get this wrong
Buying an option on a correct directional view without checking whether volatility is already expensive. If IV is elevated you are paying for movement that is already priced, and the move has to exceed that expectation — not merely happen — for the position to work.
Go deeper
There is a full lesson on this in the Academy, with an interactive widget and a Hindi translation.
Related terms
Educational and analytical content only. OptionLab Pro is not a SEBI-registered investment adviser or research analyst and does not give buy or sell recommendations. Derivatives trading carries a high risk of loss.