Implied volatility

The price of fear

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In this lesson

Understand implied volatility, calculate the market's expected move, and know why options get cheaper after big events.

Key takeaways

Implied volatility (IV) is the market's expectation of future movement, priced into options.
Higher IV makes options more expensive; lower IV makes them cheaper.
One-standard-deviation expected move ≈ price × IV × √(days ÷ 365) — roughly two-thirds of outcomes fall inside it.
IV crush: after a big event, IV often drops sharply and options lose value.

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