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, since it directly affects how expensive those contracts are. High IV means traders expect wild price swings, making options pricier; low IV suggests calmer trading ahead, making them cheaper. For example, if TechCorp stock is facing an earnings announcement, its IV might spike because traders expect a big move either way. Understanding IV helps you gauge market nervousness and avoid overpaying for options.