Implied Volatility

In the world of option trading, implied volatility signals the expected gyrations in an options contract over its lifetime. Investors and traders use it to determine option pricing. Many experts in derivatives trading look at this indicator as a more important tool than time value of an option for pricing a contract.

Implied volatility alerts an investor of the possibility of uneven changes in the price of the underlying security, as it is dependent on demand and supply of a particular option contract as well as expectation of the direction of share price