Implied volatility

Learn what implied and realized volatility measure, why the numbers differ across strikes and expirations, and how event risk changes the comparison. A high IV reading is a starting point for analysis, not a trading signal.

By OptionsKing. Publisher and editorial methods.

Learning path

Start with implied volatility, realized volatility, and the comparison between them. Keep the horizon and measurement method consistent.

Then examine term structure, strike skew, and estimator differences. You should be able to identify what a volatility statistic leaves out before using it to evaluate a premium.

Lessons

• Implied volatility: what option prices implyImplied volatility translates an option price into a model input. Learn what it describes, which assumptions it uses and how to compare it.
• Realized volatility: calculate and interpret historical movementRealized volatility summarizes past returns using a chosen method and window. Learn the calculation and what it leaves uncertain.
• Implied vs realized volatility: compare horizons and riskCompare implied and realized volatility over matched horizons. A historical gap provides context but does not guarantee profit on a short option.
• IV rank vs IV percentile: formulas and limitationsIV rank measures location within a range; IV percentile measures position within a sample. Their different inputs explain their disagreement.
• Volatility smile and skew: compare strikes on one chainDifferent strikes can imply different volatilities. Read the curve as a description of option prices and tail exposure.
• Put skew: downside pricing and risk compensationDownside puts often carry higher implied volatility than upside calls at different strikes. Compare the extra credit with the exposure it finances.
• Volatility term structure: compare expirations and event riskCompare implied volatility across expirations to identify event exposure. Separate annualized volatility from total movement over each horizon.
• IV crush after earnings: volatility and stock moves togetherAn event passing can reduce implied volatility while the stock gaps. Combine both effects before judging the option result.
• VIX vs single-stock IV: different markets and measuresVIX describes SPX option-implied volatility over a defined horizon. A stock's IV measures different exposure and is not directly comparable.
• Yang-Zhang and other realized-volatility estimatorsVolatility estimators use different parts of price history. Compare their assumptions and treatment of overnight movement before interpreting a gap against IV.

One example, several measurements

The series uses an illustrative Nike chain at $74.20, with an earnings event inside some expirations but not others. This shared example connects event variance, term structure, and post-event repricing. The figures are worked examples rather than current quotes or forecasts.

Historical realized volatility is backward-looking, IV is inferred from option prices, and a variance risk premium is not a guaranteed profit. Costs, tail events, and the choice of estimator can materially change an apparent opportunity.

Common questions

Run your own numbers

• Implied volatility calculator solve for IV from a market price, and get the daily move and range it implies.
• IV rank calculator where today sits in the 52-week range, and where percentile disagrees.
• Black-Scholes calculator the model all of this runs backwards through.
• Per-ticker volatility data dated snapshots across 60 liquid names.

Sources

• OIC, Options Pricing

Rules and thresholds above were checked against these documents on October 17, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.