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how accurate is implied volatility in predicting future moves?
user
how accurate is implied volatility in predicting future moves? how would you measure this?  if the implied volatility says that there's a 1% chance that a stock will double, and it doubles, was it "right"?  you could also say that it says there's a 99% change that it doesn't double, so was it "wrong"?   what you could measure is the variance of daily returns over a time period, and see how well that compares to implied volatility, but there's no way to compare iv with the absolute price movement.  if a stock goes up 0.01 each day, then the variance is 0 (the daily returns are the same each day), but over 250 the stock would go up $2.50.
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