The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What does implied volatility tell you?” Implied volatility basically tells us what the market expects the stock is going to do over the next year, month, 60 days, 30 days, whatever it is. Implied volatility is the market’s way via market participants actively buying and selling options aggressively or not aggressively, how far people expect the stock to move based on expectations or how willing they are to bid up the price of a call option or a put option or vice versa, bid down or not aggressively trade calls and puts. Implied volatility is exactly what it sounds like, the implied or expected volatility in the underlying security moving forward in time. And what this tells us is how much people expect the stock to move, but the problem with it is that most of the time, in the long run, this implied expectation is overstated, meaning that people expect a stock to move more th