If IV is significantly higher than HV, options might be overpriced, presenting potential selling prospects. Meanwhile, if IV is much lower than HV, options might be underpriced, suggesting buying ...

For a rough guide as to whether implied volatility is running high, low, or right on par, an option's IV can be compared against the stock's historical volatility (HV) for a comparable time frame.

For example, if you're gauging IV on an option with two months until expiration, the appropriate comparison would be to a two-month HV reading. Generally speaking, one calendar month includes an ...