IV is the market's forecast of future price movement, derived from current option prices. Find it on options chains through TD Direct Investing, Questrade, or Barchart. The VIX index measures S&P 500 IV. Typical IV ranges: 15–25% for large stable stocks, 40–80%+ for biotech or speculative stocks.
Assumes constant volatility (real IV is not constant — 'volatility smile' exists), log-normal returns (real returns have fat tails), European-style exercise only, and continuous trading. For American options (early exercise), Binomial tree models are more appropriate.
⚠️ Options are complex instruments with significant risk. Educational purposes only. Not financial advice.
Wealthsimple
Invest smarter. Start with $1.
No-fee investing in stocks, ETFs, and crypto. Auto-rebalanced portfolios built for Canadians.