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Derivatives

Implied Volatility (IV)

Definition

The market's expectation of future volatility, derived from option prices.

Understanding Implied Volatility (IV)

Implied Volatility (IV) is an important concept in stock market trading. Understanding this term will help you make better trading decisions and communicate effectively with other traders and financial professionals.

Key Points

  • Basic Definition: The market's expectation of future volatility, derived from option prices.
  • Category: This term is commonly used in Derivatives
  • Relevance: Essential knowledge for traders operating in Indian stock markets

Practical Example

When trading on NSE or BSE, you'll encounter implied volatility (iv) regularly. For example, understanding this concept helps you analyze market conditions, make informed decisions, and manage your trading positions effectively.

Related Concepts

To fully understand implied volatility (iv), you should also be familiar with related trading concepts. Check out the related terms in the sidebar for a comprehensive understanding of this topic.

Related Terms

  • Open InterestThe total number of outstanding derivative contracts that have not been settled.
  • Call OptionA contract giving the buyer the right to buy an asset at a specified price within a specific time.
  • Put OptionA contract giving the buyer the right to sell an asset at a specified price within a specific time.
  • Strike PriceThe price at which an option can be exercised to buy or sell the underlying asset.
  • Expiry DateThe date on which an options or futures contract becomes void.
  • PremiumThe price paid by the option buyer to the option seller for the contract.

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