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implied volitlity



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Implied volatility is part of the black scholes formula.

I am still learning about what you have here. I was pleasantly surprised to see some of my historical option charts got back filled. QT doesn't do that for me. Maybe its a backfill source issue.

In QT the option chain has the option greeks. From the option chain in QT you can go to view and and click on the greeks you want to see.  Implied volatility is in the QT option chains. I haven't figured out how to get the greeks in MT yet. Maybe its not there yet.

For option charts I would like to see the greeks as bottom indicators. Most importantly implied volatility.

In TOS they have implied volatility as bottom indicator in a historical stock price chart. I'm not sure how they get the number but i assume it is some sort of an average of call and put IVs of the front 2 months options, or maybe running the given prices through the black scholes to get the IV.

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Implied Vol is a reverse calculation of the options model.  It answers the question: what would the underlying volatility have to be in order to obtain the prices that the options are actually trading at?

Because of that, there is no closed-form equation to calculate IV.  It is commonly calculated through an iterative process:

Insert a volatility number into the options equation and calculate an option's price; if it doesn't equal traded price, adjust volatility number by a small amount and recalculate and test again.  Continue adjusting volatility and re-calculating until calculated price is equal to traded price within an insignificant error, then you are done and you now have an estimate of IV.  Why just an estimate?  Because you have to do that for every strike.  Good luck with that.  It's easier to just purchase the number from an options clearing house.

I doubt that TOS (through TDA) calculates that number.  TDA would purchase that data from a data vendor.

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