Options | Indicator
Implied Volatility (IV)
"Implied volatility is the future volatility anticipated by the market, extracted from options prices — an essential barometer of sentiment and perceived risk."
In-Depth Definition
Implied Volatility (IV) is extracted from options prices via pricing models (Black-Scholes, Binomial…). Unlike historical (realized) volatility, IV is forward-looking: it reflects collective market expectations on the magnitude of future price moves. IV generally rises during uncertainty (macro releases, earnings, crises) and falls in calm periods. The VIX, often called the 'fear index', measures the S&P 500's 30-day IV. IV Crush refers to the sharp drop in IV after an anticipated event (earnings, NFP): options bought before the event lose massive value even if the direction was correct. Selling options before an event to profit from this crush is a common but risky strategy.
StarQuant Insight
StarQuant monitors IV Rank (current IV percentile vs historical) and IV Percentile in real time to identify overpriced options (high IV → sell) or underpriced ones (low IV → buy), guiding options strategy selection.
Pro Tip
Always compare current IV to its history (IV Rank). IV at the 80th+ percentile over 52 weeks signals expensive options: it's the right time for volatility-selling strategies. Below 20%, options are cheap: favor buying.