How to measure and interpret implied volatility for trading options

Implied volatility is a measure of implied risk that traders are imputing in the option price

When it comes to implied volatility of options, it is slightly difficult to understand the concept offhand, unless you are able to understand a variety of related concepts. For example, it is essential to understand historical volatility and the Black & Scholes Model for options valuation before you can apply IVs. Let us begin with historical volatility first!

Chart Source: Options Play Book

Volatility is crudely measures how much the stock price or index price is fluctuating. In the above chart, Blue line is more volatile than