All termsImplied Volatility and Volatility TradingWorth knowing
Implied Volatility Premium
Implied volatility premium refers to implied volatility being elevated relative to an appropriate realized volatility expectation or reference.
Why it matters to you
An options seller may believe the market is pricing more volatility than will ultimately occur. An options buyer may believe the opposite. But an apparent premium does not guarantee that selling volatility will be profitable. Large unexpected moves can overwhelm the premium collected.