Implied volatility

Sun, 21 Jun 2026 00:00:00 +0000

Implied volatility, abbreviated IV, is the market’s forecast of how much an underlying will move in future, backed out of an option ’s traded premium using an option-pricing model, and expressed as an annualised percentage. It is called implied because it is not measured from price history but inferred from what traders are paying for the option today: given the premium, strike, time to expiry, spot and interest rate, IV is the volatility figure that makes the model’s price equal the market price. It is the single most important driver of an option’s time value after moneyness and time.

Vega (options)

Sun, 21 Jun 2026 00:00:00 +0000

Vega is the option Greek that measures how much an option’s premium changes for a one-point change in implied volatility, holding the underlying price and time to expiry constant. It is the sensitivity of the premium to the market’s expectation of future movement. Vega is positive for every long option, call or put, and negative for every short option; it is largest for at-the-money strikes and for longer-dated contracts, and it is the Greek that governs how an option reacts to a volatility event rather than to a price move.

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Implied volatility

Vega (options)