Brian Lee
Jul 28, 2025
Implied volatility (IV) reflects the market’s estimate of how much a stock’s price might move in the future. It’s calculated from option prices using formulas like Black-Scholes, which makes it sensitive to changes in market sentiment.
Unlike 30-Day Historical Volatility (\(HV30\)), which measures how much the price has moved in the past 30 days, IV is forward-looking. It captures what traders expect, not what has already happened.
To estimate a one-day expected price range based on IV, you can use the same formula as Daily Volatility (\(DV\)), simply replacing HV30 with IV:
\[ \frac{IV}{\sqrt{256}} \]