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Encyclopedia DeFi · Entry 348

Implied volatility: what an option price says, and what it does not

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Key facts

Key facts for Implied volatility: what an option price says, and what it does not
FactDetailSource
HistoricalHistorical volatility is calculated from observed past price changes.[1]
ImpliedImplied volatility is inferred from option pricing.[1]
VegaVega describes modeled sensitivity to an implied-volatility change.[1]
01

Hold the other inputs steady

Imagine the same option evaluated at the same underlying price, strike and remaining time, but with a higher market premium. A pricing model can translate that change into a higher implied volatility. It does not follow that the seller now expects a specific upward move.

Comparing different strikes or expiries introduces other differences, so a single percentage needs its contract context.

02

Treat Greeks as local estimates

For an invented vega of 0.20 quote units per one percentage-point change in IV, a three-point increase estimates a 0.60 rise in option value if other inputs stay fixed. Actual changes can differ because sensitivities and market prices move together. The estimate is not a guaranteed tradable gain.

03

The displayed model matters

Deribit’s inverse-option documentation says its displayed IV uses the forward rather than the spot index as the underlying input. Two platforms can therefore show different IVs if their prices or modeling assumptions differ. A high IV alone does not establish that an option is overpriced; that conclusion requires a view about future outcomes and costs.

Direct answers

Questions people ask

Does 80% IV mean an 80% chance the asset rises?

No. IV is a modeled measure of price variability, not that directional probability.

Inspect the evidence

The answer and key facts have stable claim links. These records retain the scope and qualification when reused.

Implied volatility is the volatility input consistent with an option’s observed price under a chosen pricing model and other inputs. It differs from historical volatility measured from past returns. Higher implied volatility generally raises otherwise comparable call and put values; it does not specify whether the underlying will rise or fall.

Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.

Link to this claim
Historical: Historical volatility is calculated from observed past price changes.

Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.

Link to this claim
Implied: Implied volatility is inferred from option pricing.

Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.

Link to this claim
Vega: Vega describes modeled sensitivity to an implied-volatility change.

Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.

Link to this claim
Revision history
  1. — First publication after primary-source research and separate automated verification.

Source register

Sources and references

Retrieval dates and locators are recorded individually.
  1. Volatility and the GreeksOptions Industry Council

    Model-implied volatility and its interpretation.

    Locator: Historical versus implied volatility · Version / scope: Documentation retrieved for the 2026-10-02 editorial scope; content hash recorded · Retrieved: 2026-10-02T18:53:21.280ZOpen source
  2. Options PricingOptions Industry Council

    Option price components and model inputs.

    Locator: Intrinsic value; Time value; Premium inputs · Version / scope: Documentation retrieved for the 2026-10-02 editorial scope; content hash recorded · Retrieved: 2026-10-02T18:53:21.237ZOpen source
  3. Inverse OptionsDeribit

    Official support article retrieved through its public Help Center API; inverse settlement specifications.

    Locator: Settlement process change; Settlement examples · Version / scope: Documentation retrieved for the 2026-10-02 editorial scope; content hash recorded · Retrieved: 2026-10-02T18:53:21.588ZOpen source
How this article was made

Research and drafting use AI assistance. A separate automated review checks claims against primary sources; no external expert or named human review is implied. Publication, substantive editing, source retrieval and verification are recorded separately. This version was independently checked by an automated reviewer on 2 October 2026.

Editorial method and corrections

Degrees of Satoshi editorial project. “Implied volatility: what an option price says, and what it does not.” Published 2026-10-02; updated 2026-10-02. https://degreesofsatoshi.com/encyclopedia/implied-volatility-options/