Implied Volatility (IV)

Implied Volatility (IV) is the market's forecast of how much a stock's price will swing up and down over the next few months. It's called "implied" because traders infer it from option prices (contracts that give you the right to buy or sell a stock at a set price). You'll encounter IV when trading options or researching them—it directly affects how expensive an option is. Higher IV means bigger expected price swings, so options cost more; lower IV means calmer expectations, so options are cheaper. For example, if TechCorp stock is about to announce earnings, IV might spike because traders expect wild price moves. Understanding IV helps you avoid overpaying for options or spot when the market is unusually nervous.