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DEFINITION of 'Implied Volatility-IV'. Implied volatility is the estimated volatility of a security's price.
If the implied volatility is 90, the option price is $12.50. If the implied volatility is 50, the option price is $7.25. If the implied volatility is 30, the option price is $4.50. This shows you that, the higher the implied volatility, the higher the option price. Below you can see three screen shots reflecting a simple at-the-money long call with 3 different levels of volatility. The first picture shows the call as it is now, with no change in volatility.