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Market Implied Volatility
Jon "DRJ" Najarian, the venerable CBOE option market maker defines Market Implied Volatility in this fashion:

"Option pricing is very similar to the pricing of insurance on a given asset. If you live in an urban area, the likelihood of your car being stolen is much higher than that of that same car being stolen in a rural setting. Thus, you would expect to pay a higher premium to insure a car in the city versus that car on a farm. Similarly, a given stock’s movement is much less predictable ahead of earnings, new product announcements and litigation. Therefore, we use high volatility readings as a sign that the market expects something extraordinary and low volatility readings as the reverse."

At Hamzei Analytics, we use MIVs to measure & relatively rank the riskiness of various stocks, HOLDRs & indices.  Our MIV engine also serves as a major building block for feeding an 8-way time-to-expiration & price balancing dataset for each component of our popular Real-Time Volatility Matrix. MIV values foretell most about an asset from its high volume option strikes. This always coincides with At-The-Money options.  Thus all MIV are computed for ATM call & put options.

Chat with Fari on Fari Hamzei writes for CBOE Options Hub on event-deriven basis       Futures & Options for Stock Indices
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