Implied Volatility Calculator
Reverse-engineer the implied volatility from any option price.
Option Parameters
Results
Enter parameters and click "Calculate IV" for results.
Understanding Implied Volatility
Implied volatility (IV) represents the market's expectation of future price movement. Unlike historical volatility which looks backward, IV is forward-looking and derived from current option prices.
How It Works
Our calculator uses the Newton-Raphson method to iteratively solve for the volatility that makes the Black-Scholes theoretical price equal to the market price. This is the same technique used by professional trading systems.
Why IV Matters
- Pricing: IV is the key variable in option pricing models
- Trading Signals: High IV suggests expensive options, low IV suggests cheap
- Risk Assessment: IV indicates expected price ranges
- Strategy Selection: Different IV environments favor different strategies
IV Rank and IV Percentile
To put current IV in context, traders often use IV Rank (where current IV falls in the 52-week range) and IV Percentile (what percentage of days had lower IV). Both metrics help identify when IV is historically high or low.