Implied Volatility

The market expectation of future volatility derived from option prices.

Implied volatility is the volatility level that, plugged into an option pricing model, matches the option current market price. Higher implied volatility raises premiums because larger expected swings make options more valuable. Traders compare it to historical volatility to judge whether options are cheap or rich.

Implied volatility surged before the earnings report, making the options expensive to buy.