Definition
How much the options market expects a price to swing in the future, worked out from option prices.
The story
If options on a stock suddenly get more expensive just before its earnings report, implied volatility is rising: traders are paying up because they expect a bigger move. After the report, it can drop quickly. The VIX (Cboe Volatility Index) is the most widely followed example: it's calculated from S&P 500 option prices and reflects the market's expected volatility over the next 30 days.
Why markets watch it
It's the market's own forecast of turbulence, and it shapes what options cost.
Connects to
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms