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Stocks

Implied Volatility

Implied volatility is a fundamental concept in finance that measures the level of uncertainty in a stock's price. Unlike historical volatility, which looks at past performance, implied volatility focuses on the current price of an option. When the price of an option increases without a corresponding increase in the underlying stock, it is an indication of a rise in implied volatility. This metric is crucial for investors as it helps them gauge the potential risk and return of a stock.

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