Implied volatility is a standardized way of describing an option’s relative price. But it’s more than just a measure of price. It’s also the expected volatility of the stock over life of the option. That is, it tells us how big a stock’s price fluctuations are expected to be in the future, which is vital to determining what option strategy is best.

Implied volatility is calculated by reversing the option value formula. The good news is that the software does the math so you don’t have to. In this insightful video, you’ll learn how implied volatility can be used to improve your trading results.