Implied volatility is a metric that captures the market’s view of the likelihood of changes in a given security’s price. Investors can use it to project future moves and supply and demand, and often employ it to price options contracts.

Implied volatility is not the same as historical volatility, also known as realized volatility or statistical volatility. The historical volatility figure will measure past market changes and their actual results.

Click the video above to see why implied volatility is so important and how we use it: