implied volatility
/ɪmˈplaɪd ˌvɒləˈtɪlɪti/
the market's forecast of likely future price movement, derived from current option prices
implied volatility in a sentence
“Implied volatility spiked before the earnings announcement, making options expensive.”
Origin of implied volatility
Latin implicare to involve + volatilis flying — volatility implied by market prices
Related Words
delta
the rate of change in an option's price relative to a $1 move in the underlying asset
theta
the rate at which an option loses value each day due to the passage of time; time decay
hedge
an investment made to reduce the risk of adverse price movements in an asset
futures contract
an agreement to buy or sell an asset at a predetermined price on a specific future date
leverage
the use of borrowed capital to amplify potential returns — and potential losses
call option
a contract giving the buyer the right, but not obligation, to purchase shares at a set price before expiration