This interpretation overlooks an important point, however. Options trade at certain levels of implied volatility because of current market activity. In other words, market activity can help explain why an option is priced in a certain manner. Here we’ll show you how to use implied volatility to improve your trading. Using Implied Volatility as a Trading Tool It’s important to understand that for investors, implied volatility is important because it provides insight into what the market thinks about a stock’s price movement – whether the movements will be large, moderate, or small. Trading platforms generally calculate implied volatility using the Black Scholes formula. There’s no need to estimate the metric yourself or configure any parameters. You just need to choose a trading platform that can calculate it for you when you need it.