Implied volatility for options

Question

To predict where a stock might trade at a year from now, you use a formula based on HV, stock price x IV, and that provides an assumption of where the stock might trade at a year from now.

When calculating this for an option, you add the square root of the option life span divided by 365 at the end.

When doing the calculation for the option, do you use the stock price or the strike price of the option x by the options IV or the stock's IV?

Bob Baerker · Accepted Answer

I have never put much credence in trading based on guesstimates of future price based on stats such as IV that may shift to different levels and remain there.  Current price, current IV and delta are where I'm at.  Be that as it may, here's some information that might be relevant to you

https://finance.zacks.com/use-implied-volatility-forecast-stock-price-8231.html

Calculate the standard deviation of the stock's price. First, divide the number of days until the stock price forecast by 365, and then find the square root of that number. Then, multiply the square root with the implied volatility percentage and the current stock price. The result is the change in price. For example, a $10 stock with a 20 percent implied volatility that expires in six months (183 days) would have a 68 percent chance of rising or falling by approximately $1.41

You can find other sources by Googling:  "Using implied volatility to forecast"

Implied volatility for options

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