Implied Volatility

The implied volatility of an option is the volatility as determined by the market price of the option when calculated using an option pricing model, such as the Black Scholes model.

In other words, implied volatility is the market's opinion of the volatility of the option's underlying security and is determined using the following information:

• The price of the underlying security
• The market price of the option
• The strike price of the option
• The expiration date of the option
• The interest rate, if applicable
• The dividend yield, if applicable

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