Implied Volatility Explained (The ULTIMATE Guide)

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf
💰 Get up to $3,000 when you open and fund your first tastytrade brokerage account: geni.us/tastytrade
🔥 Learn data-driven options strategies: optionsforbeginners.teachable...
💻 Maximize your trading with TrendSpider's advanced charting tools and scanners: geni.us/trendspider
====
Implied volatility (IV) is a critically important options trading concept to understand. At first, implied volatility seems very complicated, but once you understand what it actually represents, it's very intuitive.
In this video, I break down the following topics and use examples to help you learn each concept:
1) What is Implied Volatility? What does it measure?
2) Implied Volatility vs. Historical Volatility (HV)
3) What IV means regarding the implied probabilities of future stock price movements.
4) Measuring IV with IV Rank and IV Percentile (and which is better?)
5) Calculating expected stock price moves over any time frame (expected move formula)
6) Implied volatility leading up to earnings reports (option buying opportunity?)
After this video, you should be very comfortable with what implied volatility means and represents, in addition to more advanced topics regarding IV.
Be sure to leave a comment down below with any questions you may have!
=== RECOMMENDED VIDEOS/RESOURCES ===
Implied Volatility Explained (Article): www.projectfinance.com/implie...
Options Trading For Beginners (PLAYLIST): • Become an Options Trad...
tastytrade Tutorials (PLAYLIST): • tastyworks Tutorials
Option Pricing EXPLAINED: • Option Prices EXPLAINE...
Options Trading 101: • Stock Options Trading ... tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Project Finance(Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade.

[@projectfinance]

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf

[@Eastbaypisces]

i dont understand how u get the calculation for it? like how d they come up with 68% probability and all?

[@paysev6256]

Your content has insanely good quality. I am not getting why you only have 95k subs. Thank you for the work you put in!

[@2-InfinityNBYND]

Man, you’re awesome at explaining options. Thank you for these videos! 🙏

[@samuimuscle]

This is not the first time I watch the VDO the more I watch plus observing the market in the brokerage platform the more I understand. Great job Chris!

[@henishfrancis6058]

All your videos are very informative , appreciate your step by step teaching method and the tools that you use for that purposes. I appreciate all that you do and expect more videos from you in the near future. Thank you again!!!

[@Tpartee3]

Your channel is so professional and easy to comprehend the information. Thank you

[@jerrynix5206]

This is definitely a video I'll be watching several times, alot to take in wow. Thank you!

[@projectfinance]

It sure is! Lots of stuff here but don't worry about memorizing it all. The basic meaning/representation of IV is the most important part to understand. Thanks for the comment, Jerry! -Chris

[@mathlivernois1609]

@@projectfinance Why not use 252 instead of 365 to calculate a stock price range for a certain time period since we just have a 252 trading day

[@YamahaC7SRG]

Great video! Thanks! Just saw it today and wanted to comment that people shouldn't stress too much if they don't follow the math of IV. IV is 'implied' because it is estimated assuming Black-Scholes is valid and working backward from actual trade data to calculate volatility from the B-S model. The problem for me is that I believe B-S is fatally flawed and IV is, thus, not very useful. As Nassim Taleb asserts, prof. traders use advanced rules of thumb that they learn over years of experience to trade options successfully. Newbies (and those adept at math) tend to treat the Greeks and such calculations as Gospel from Above and blindly rely on them for decisions without understanding what they're really doing and the severe failings of B-S. It is probably better not to worry much about a given IV calculation because the figure can be wildly wrong, right when you need it the most. Rather, study the CONCEPTS underlying options and the all Greeks and start out trading options very slowly by paper trading and then doing small, real trades to see how things work in the Real World. A successful mentor is invaluable.

[@robertocfaguiar]

I like your comment a lot. I have just started studying options and have just traded paper. I don't know all the math yet, but my feeling is exactly what you have said above. Would you be so kind as to recommend a book where the concepts are easily explained and make the case that, Greeks and IV, have to be seen in another dimension, in order to make a better choice when trading options? Thanks.

[@stephenglazer4224]

I have heard the same. I am no expert but from what I understand the IV is calculated by back solving for V in the B-S model by using actual option prices and SP moves. Many say that the B-S model itself is fatally flawed. In any case I recently bought a few Google Puts with two year expiry dates and a strike price of @135. Each cost $1710. I won't go into my full bear case for google but I do think the options are cheap. The same call option costs twice as much. The stock has traded as low as $88 already this year and its only a few dollars away from it's all time high. Even if there is just a 20 - 25% overall market drop in the next two years that will be more then enough to cover the trade.

[@me4901]

@@stephenglazer4224 B-S was written for European style options which can only be exercised at expiration. American style options can be exercised at any time. . So there's differences there. I haven't had enough experience to know exactly how much that difference matters, but it is worth knowing.

[@ThePhinista]

Thank god I actually paid attention in that one stats class, makes this so much easier to follow.

[@embracevanity9871]

I was avoiding this video bc of its length but am so glad that I engaged. You are so incredibly good at explaining how things work in the simplest of ways. Thank you!

[@son_gokhan148]

How are u doin now

[@bbwphantom]

All your videos are the best explanations I see anywhere. Everything is broken down and explained.

[@projectfinance]

Thank you so much! I appreciate it. -Chris

[@theoreticalexercise]

Wow. Clearest explanation of IV Rank vs IV Percentile ever. Very concise. Thank you. I have changes to make

[@julioc4978]

The best video I have ever seen about Implied Volatility! Thank you! I now see why some people use the bollinger bands to trade and also why they work,

[@projectfinance]

Thanks for the comment/feedback! -Chris

[@Eastbaypisces]

what are bollinger bands?? i heard that before

[@fminc]

Thanks For your time Chris. This was very interesting and valuable.

[@me4901]

I super appreciate this video. I was looking for a good explanation of implied volatility that includes the statistics side and this is great.

[@trevorsvandrlik9104]

I've been watching options videos for 2 years, and just today I finally feel like I have an understanding of IV!!

[@projectfinance]

Yes! That was the goal of the video! I'm glad to hear it was helpful. -Chris

[@vakeesanmahalingam4078]

@@projectfinance great job on the video!!!... What I find confusing is the constant use of the term implied volatility throughout the video... I think you mention it in full like over 200 times... For future videos you should just say you'll be referring to implied volatility as IV and then explain it like you did... It would make it a lot easier to follow without constantly saying volatility every 2 seconds for 30 minutes Great video though!!! Tons of value!! Finally feel like I have a grasp on IV but I disagree with what you mention about IV and earnings. Many ppl profit trading based IV rank and IV during earnings, selling option strategies like iron condors.

[@rswatashi]

I really got a great information from your session. I'm going to work on analysis of stocks on Excel based the totally different observations from you. Thank you.. Btw, when you talk, your face looks like smiling always. It's a god's gift. God bless..

[@njperuviankid]

God bless brother. I just wanted it for the first time. Will def watch it at least two more times. Thank you

[@tastysti5322]

The implied volatility of me understanding this video is high. Just subbed 🚀

[@zbhalaji]

Spot on! thanks for the good work team. Chris has made a nice narration. Thanks.

[@padmansundar3425]

IV explained very well with good examples! helped in practical application which most videos on this subject do not do! Thanks a lot!

[@guyredares]

Thank you. best option videos on KZbin by far

[@projectfinance]

I really appreciate your comment! -Chris

[@monsheet]

This video is such an eye opener. Awesome, Buddy!!

[@LeMuseHere]

This impled volitlity video on implied volitility is the best implied volitility, and most thorough implied volitility video on impied volitility I've yet seen on implied volitility.

[@leejmuam1]

🤣

[@OtRatsaphong]

Very informative video, Chris, but one that i'll have to step through carefully to fully understand how to use IV Percentile with my options trading strategies.

[@bobbydejesus5987]

Hey Chris, thanks for all you do for us!! You are the best I've seen at teaching this stuff. A true godsend my friend! Question. To calculate IVP, how do I find the number of trading days a stock has been under it's current IV? My bad if this is a silly question. Really new at all of this.

[@jasondillon2567]

Dang, this is such useful information, presented in a very understandable way. Thank you!

[@colybwoy]

Great video, this is a wonderful resource to archive and return to for a refresh.

[@ecast1500]

I saw this video but did not watch until now, 10.09.21. It shed a bit of light on what I was actually seeing. I was following F (ford) when it was trading between 14.00 and 15.00. The options for calls and puts were low for a stock at that price. I looked at other stocks at that price and the option prices were way higher. This video gave me an idea on why. Ford was trading in a range for a long time. Now the trick is to find out what to do with this knowledge, good luck to all

[@youngb.wiseman3576]

Another great video my man. Going to watch again like I do most of your videos. So much to learn! 😁

[@projectfinance]

I appreciate that! Thanks for watching and commenting. Let me know if you have any questions!

[@sudhirpatil3434]

It is complex sub to understand - i will have to watch a few more times just to make myself understand.... Thx for your genuine efforts!

[@emmanuelnsoedo5505]

chris you are a great teacher and thank you.

[@skyred289]

Thanks Chris.. understood a lot from your explanation..

[@Myopinion23]

Great video!!! Very in-depth

[@TheRealStevenAdams]

Great job explaining IV! Thanks.

[@sahidycastillo5565]

Thank you for sharing your knowledge with us. It was very helpful for me since I just recently started option trading. Blessings

[@projectfinance]

You're welcome and thank you for watching/commenting!

[@vital4644_]

Dude this is good information. Wish i knew more!

[@jakobafeworiki1006]

i have gain so much value from u thank u so much u realy are the best at ur profission

[@jeffreymelendez]

Awesome video, Chris. I've learned more about IV in the 29 minutes and 50 seconds than I did in the last year studying IV.

[@projectfinance]

Amazing! That’s what I like to hear!

[@dynamic9679]

dude that's so dense.

[@bernardshaw6905]

Outstanding video. Great help, thank you.

[@Ilyakurishko]

Great video! You are doing great job sharing this content!

[@GapBahnDirk]

This is such a good resource for options traders. Please continue with educational videos Chris!

[@projectfinance]

Thank you for the continued viewership! I don't plan on stopping.

[@gemini22581]

@@projectfinance you are touching our lives everyday with your knowledge and effort. Thank you so much for taking the time to do this. I have subscribed!

[@nichen6966]

Thank you. Fantastic explanations of IV concepts in a practical understandable way.

[@projectfinance]

Thanks for watching and I'm glad you found it helpful. It's a tough concept at first, but after some thought it becomes more intuitive.

[@nichen6966]

projectoption Yes, as others have mentioned, will come back to refresh my understanding further. Thanks.

[@cottondai]

Great video. Thank you for your lesson.

[@projectfinance]

You're welcome and thank you for the nice comment! -Chris

[@bozzicone]

That was hard! :-) you're just great ..... I think I have to listen this video a lot of time 🙂 thank you.

[@jalanubha]

Best Video on IV!! Thank you

[@lapogk1543]

Thanks. one of the best explanations.

[@gwentchamp8720]

Awesome video ! Trying to watch as many of your awesome videos as I can !

[@projectfinance]

Thanks for watching/commenting! I am glad you're liking the videos.

[@basildog007]

Outstanding material!

[@projectfinance]

Thank you! -Chris

[@jakobafeworiki1006]

u realy are amazing u are the best teacher i have ever had i realy apprite u and all ur vids, and i realy hope u becoume even bigger then ur are and wish u all the best brother

[@DTsoumpas]

Thank you for an amazing video, I am wondering if you have any recommendations for options data? (Having historical implied volatility numbers would be useful for conducting analysis)

[@warrengedye2888]

Very very very good explanation!!

[@dineshkukreja4964]

You're brilliant teacher. Keep up the good work.

[@projectfinance]

Thank you! 😃

[@premierinvestments5771]

-great info Chris, thankyou!

[@MaxxerG]

I’m binging all of Chris videos

[@CWLong]

Another wonderful explanation.. and nice lounge music to end with.

[@atomize]

Your explanations are so clear and perfectly devoid of any hype or conversational fluff - the generated Closed Captions are nearly perfect =) - Tip for other lazy viewers like me: Save the transcript for this video (and any where the articulation is so consistent) for some instant reference material that doesn't require re-watching the video 1000 times. Use the three dots by the bottom right corner of the video player and do "Open transcript". Boom, the notes you were never gonna take =)

[@projectfinance]

Thanks so much for watching/commenting!

[@markc5771]

Excellent idea!! Or if you're someone like me that remembers better from writing out the notes, definitely do that. I do that with all his vids

[@FRANKWHITE1996]

That is one huge portion of something i was lookig for! Subcribed ;)

[@davidtewelde2606]

simply the best.very easy to understand

[@lliang9838]

Another educational video, Chris! Thanks for the clear explanations. One concept that I am confused on is "How come those options that are expiring shortly after earnings report do not decay as they normally would?" Thank you for your time!

[@andis9076]

U mean earning on Friday morning?

[@me4901]

They aren't decaying because people are still expecting a big move on earnings day compared to a non earnings day. They believe if there's only one day to make a really big move, it could be done

[@alariclau]

Good explanation!

[@dougsmith9779]

good info and well delivered tks

[@projectfinance]

Thank you, Doug!

[@alvinstephensii844]

I find your videos highly informative. The best in KZbin. Question. As you sit down each evening/morning, what procedures do you go through to determine what options you are going to invest in the following day as there are 1,000’s to chose from.

[@projectfinance]

I don't. I'm not a trader like that. I don't trade every day. Sometimes I only trade a few times a month. I have a watch list of stocks that I watch and mostly do things in those stocks, or the overall market index (S&P 500).

[@shawndinh367]

Hey man hope this message finds you well and safe. Pertaining to using the standard deviation formula in order to calculate a stock's one year expected range, will you have to use the average price of that stock or its current stock price when inputting the data in the formula? Thank you and keep up the great work!

[@absolutebosscollective8202]

Thanks for the formulas!

[@spacecat556]

I understood everything in the video, except for the last part of earnings Will have to rewatch it many times i think

[@kingdrew5083]

This is great explanation video.

[@artempazukhin4246]

thank you for this video!

[@noahintara6619]

Great job, Braddah. Thanks.

[@projectfinance]

Of course. thanks for watching!

[@lost70s]

I watched about 75% of the vid .. when I first heard you say .. you will be and expert .. I though ok more bullshit ... but still listened . I was impressed ... this was an excellent vid on IV .... when I saw that you showed TW platform I thought well this is a Tom Sosnoff production and I still wonder ... BUT you also figured out that IV Percentile is better than IV Rank ... again I was impressed . Most just fall to the ground to worship all that Tom Sonoff says and he is dead ass wrong that the IV Rank is better . And Dr. Data showed it in a vid but dare not tell the king he is wrong . I am a fan of Don Kaufman ( have listened to him for years on the Swimmlesson chat room in TOS and have copied many of his presentations from there ) and Don is sharp and does a good job explaining options and IV . For concise brevity with a lot of infor .... I think you beat him here . Not an easy task . Shame that you don't use the TOS platform as it is superior to TW for options and data and projection . In the past when people ask were can I go to learn options I most of time point them to Theo Trade - Tasty Trade some ... I'm going to point them to you here too . Hoping you do as good a job on the other subjects . IF >>> IF your other vids are as accurate and concise as this . You have got a killer program going here . I could not have done it better .. but that is not saying much . I must admit that in the back of my mind that I think you are produced by Tom Sosnoff ... but it's only a gut feeling and I can be very wrong . Thanks ........

[@projectfinance]

Thanks for the comment/support! I did work at TT a while back, but I have developed my own trading philosophy and way of explaining options. -Chris

[@Dougie1969]

Lost70s Sounds like you're no slouch on the options subject, you've clearly done your homework. I don't believe Chris is beholden to anyone though, I'm just saying, this guy has helped me a LOT. When I started off buying stock a couple years back , I'm ashamed to say I burned through 1000s.. Now I listen to people like Chris, I won't say I'm getting rich, but I can say I don't lose money anymore. I recently started using options, and love it, just definitely need to learn patience.

[@lost70s]

@@projectfinance LOL I think it 's the production format that made me think you were with him thanks LOL

[@petergilson4861]

Really great vid; for the first time I start to have the very beginning of the feeling of getting a grip on IV...... LOL Thanks for this!! Unfortunately my TWS doesn't support IV ranking nor IV percentile... Is there a free site offering this info or a good place to find these figures? As I am not a US citizen I can't open an account here so I'm stuck with the knowledge but not able to use it....

[@ursulamadrid4006]

execellent explanation!

[@prabhakarpotu6617]

Excellent and very good lecture

[@rahsta106]

Good stuff. Im looking to take your VIX course.

[@routerpete1674]

Good video. So when I looking to long a stock for some immediate profits, how how do I predict the effects of a $1 move on the option price?? In other words, why wouldn't I always buy contracts that are just OTM and are cheaper than ATM contracts?

[@mintushah1]

hi, GR8 Video on IV .can you explain on the Day of the earning if the underlying price decrease what would be the effect on optional price?

[@stonathanjokes2142]

Constructive feedback. Sometimes I have trouble with the vids for use of terms that aren’t defined. In this video its straddle. I went to go look it up, but this was supposed to be an ULTIMATE guide :)

[@breezefor5966]

Chris you are the man👍🙏

[@projectfinance]

Thank you! I'm doing my best.

[@Yanjh]

@projectoption, could you please explain how to calculate IV's at various strike prices ? I can see IV increase when striking prices are further from stock price, but how wonder how to calculate based on IV at ATM price.

[@dvirhanum9530]

I like your explanation. Very professional, comprehensive and straight forward! How can we support?

[@epagliu]

Perfect video!

[@losbeonit8865]

My question is how do u know what’s a good percentage for an implied volatility on a high liquidity stock vs a low liquidity stock ?, because what might be high for one might be low for another. 50% or below???

[@cansly92]

Very Good Video Very Clear How do you plot historical IV, rank & percentile over time? Is it possible to plot premium VS stock price over time for a fixed strike price? Thanks

[@ericwright1668]

Hello, at time stamp 4:50 you scroll up and say how we arrive at the implied volatility. Can you please explain that more? I have never understood what those numbers mean specifically the percentages correlation to the dollar amount. Thank you

[@YI-ul1oi]

great lesson. thanks so much.

[@projectfinance]

You got it! Thanks for watching.

[@cyberjet2]

that was nicely explained, what I don't understand if the 1SD is higher and we expect bigger move with high IV why people always say at high IVR you sell premiums and buy them at low rank ?

[@jaredbolotte9211]

great explanation

[@rohitindurkar]

You are doing Great job . Thank you.

[@projectfinance]

You're welcome and thank you for the comment!

[@artiomkamincki]

Hi. Thank you very much for the video! Few people today provide information in such an accessible and understandable way! Cool! Can you please tell me where I can find a handy chart of implied volatility in the public domain? My broker unfortunately only provides average volatility...

[@tjjeannette]

Thanks Chris!

[@rafiqphy]

Awesome explanation !

[@projectfinance]

Glad you liked it!

[@lusmas99]

Great video.

[@vivekjoshi7798]

outstanding clarity

[@projectfinance]

Thank you for watching!

[@charitymonae5608]

You’re incredible for sharing this knowledge! Thank you🙏🏾

[@dilip197905]

How do i find the stock IV if my platform dont provide that data. Is it call IV or the Put IV.od some combination??

[@williambartmann5541]

Great video

[@admiralknnight5779]

EXTREMELY WELL EXPLAINED TOPIC OF IMPLIED VOLATILITY. I HAVE 2 QUERIES FOR YOU IF YOU COULD CLARIFY, PLEASE...1) DO YOU HAVE A METHOD OR CAN YOU SUGGEST A METHOD TO GET TO THE FORMULA TO CALCULATE THE IV PERCENTILE, VIZ. THE NUMBER OF DAYS FOR THE NUMERATOR THAT THE IV WAS BELOW THE CURRENT IV. 2) EXPECTED PRICE MOVE FORMULA... ARE BOTH OF THESE AVAILABLE ON ANY PLATFORM OR DOES ONE NEED TO CALCULATE THIS EVERY TIME? WOULD REALLY APPRECIATE THIS, CHRIS....

[@growgreencapital4484]

You r awesome brother! Thank u ❤

[@shadricosuave]

Good vid - but not easy to understand. Will need to watch again. Thanks for producing.

[@narindersingh6980]

Thank YOU