Implied Volatility

The level of future price movement that current option prices assume.

Example

Implied volatility often rises before an earnings announcement and falls after it.

A drop in implied volatility can reduce an option's price even when the underlying moves the way the buyer hoped.

Time Value — The part of an option's premium above its intrinsic value, reflecting time left and expected volatility.
Volatility — How much and how often an asset's price moves, up or down, over a given period.
Option Premium — The price paid by an option buyer to the seller for the contract.

You pay for intrinsic value, time and uncertainty - and time runs out — An option's price has two parts: what it would be worth if exercised now, and extra value for the time and volatility left. That second part shrinks to zero by expiry. (12 min)
Appraising one position: maximum loss, break-even, cost and what you are really betting on — Before any derivatives trade, write down five numbers. If you cannot fill them in, you are not evaluating a position - you are guessing. (11 min)