Implied Volatility
The market's forward-looking estimate of how much price will move — priced into every option.
Definition
Implied Volatility (IV) is the expected annualised volatility of the underlying that, when fed into an option pricing model such as Black-Scholes, reproduces the option's current market price. In short, it is the volatility the market is implying by what it is willing to pay for the option — a forward-looking number, not a historical one.
Why it matters
IV is the single biggest swing factor in option premiums after the underlying itself. Higher IV means richer premiums — good for sellers, expensive for buyers. IV also tends to spike before events (results, policy decisions) and collapse afterwards, the so-called IV crush. Because IV drives vega, traders watch it as closely as direction.
Example
Two NIFTY 22,500 calls with the same expiry: one priced at IV 12 percent, another at IV 20 percent. The 20 percent option costs far more even though strike, spot and time are identical — because the market expects bigger swings. If IV then drops to 14 percent before expiry, that option loses value even if NIFTY does not move (illustrative figures).
See it live
TradePulse shows live IV per strike on the option chain, so you can spot rich and cheap options.