Calculate key volatility metrics for options trading, including implied volatility, historical volatility, and volatility skew analysis.
Option volatility is a crucial metric in options trading that measures the expected magnitude of price changes in the underlying asset. There are two main types of volatility:
Follow these steps to calculate option volatility metrics:
The calculator will automatically compute the implied volatility and other important Greeks.
Implied volatility is expressed as a percentage and represents the market's expectation of future price movement. Higher IV indicates greater expected price swings.
The calculator provides the following Greeks:
There is no "good" or "bad" level of implied volatility. It should be compared to historical volatility and the volatility of similar assets. Generally, higher IV means more expensive options.
Higher volatility generally leads to higher option prices because there's a greater chance of the option ending up in-the-money. This is why options tend to be more expensive during market uncertainty.
Volatility skew refers to the pattern where options with different strike prices but the same expiration date have different implied volatilities. This often shows that out-of-the-money put options have higher implied volatility than out-of-the-money call options.