The underlying of an option contract is a stock, ETF, or index that the option contract trades against. The price movement and volatility of the underlying affects the pricing of the option throughout its life span.
The implied volatility of an option contract is an estimation of contracts volatility based on the current trading price. The more expensive the option, the higher the implied volatility. Implied volatility gives the trader a sense if the contract is relatively cheap or expensive.
A typical market scenario, in which the implied volatility or price of the nearest month is lower than the corresponding implied volatility or price of longer duration contracts. This term was initially used in oil market.[click to read more]
Extrinsic value is also known as time value. The amount of time remaining in the option is a key value for pricing and determines how long the underlying has to move up or down at current or future volatility.
Term used for every third Friday or March, June, September and December. Volatility generally increase drastically on these days as these days are expiration days of Index futures and options, Stock Futures and Options.[click to read more]
The 30 Day Implied Volatility [underlying] is the interpolated implied volatility forecasted over the coming 30 days for the underlying. This provides a VIX-type volatility measure to individual underlying.
Implied Volatility [Contract] defines the individual contract's or spread's implied volatility. Implied volatility at a contract level is the volatility implied for the future by the contract's current pricing.