Below is a list of daily implied volatility ranges for various assets.
These levels are based on 1-month implied volatility and can be used as dynamic, market-based support and resistance levels.
Implied volatility suggests that if prices were normally distributed, there would be approximately:
- There is a 68.2% chance that future price movements will stay within 1 standard deviation of the mean.
- There is a 95.4% chance that they will stay within 2 standard deviations.
- And 99.6% chance they will stay within 3 standard deviations.
But keep in mind that these probabilities are based on the assumption of a normal distribution, which is not always the case.
However, it gives us a clear indication of what the market expects in terms of price action.
Implied volatility is an annualized number, but we can convert it to a daily range like the ones we see below.
These levels by themselves are very practical, but when we combine them with technical analysis tools such as pivot points, fibs or psychological levels, you can identify potential entry, profit or stop levels -loss with increased confidence.
What’s unique about using implied volatility is that it provides a completely objective, data-driven price range to complement your subjective technical analysis.
Implied volatility levels (April 11, 2024)
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