Volatility
A measure of how much the underlying price tends to move (realized) or is expected to move (implied).
Quick facts
| Field | Value |
|---|---|
| Category | Options Trading Terminology |
| Use | Learn vocabulary to read chains and manage risk |
Definition
Options are volatility products. Implied volatility (IV) is “priced into” premium. High IV usually means higher premiums; falling IV can hurt option buyers even if direction is correct.
Quick example
Info
Example: After a major event, IV often drops (“IV crush”), reducing option premiums.
Premium level vs IV (illustrative)
Higher IV usually means higher option premiums; IV crush after events can cut premiums sharply.
Where you’ll see it
- Option chain (strikes/expiries/OI/volume)
- Order window (market/limit/SL)
- Positions page (P&L and Greeks)
Common confusion
Avoid treating a single term as a “signal”. Terms help you describe risk; decisions should come from a complete plan (view, sizing, exits, and liquidity).
Summary
- A measure of how much the underlying price tends to move (realized) or is expected to move (implied).
- Use this term to communicate risk and intent clearly.