The arithmetical process for computing implied volatility is rather daunting, but straightforward. Typically, options are priced using a Black-Scholes formula, or a derivative thereof, requiring a number of variables: the underlying price or exchange rate, the strike/purchase price including premium, time to maturity, risk-free interest rates, and volatility of the underlying currency.    The first four variables are known. The fifth, the implied volatility, can be inferred from the price of the option. It is not necessary to perform the calculations themselves. There are many public sources that publish this data, or if you are willing to pay a fee, you can obtain customized information from ivolatility.com. 

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The following chart supplied by benziga.com reflects the volatility of Silver for the one-year period ended last February.

  Click on image to enlarge. 

Interestingly enough, the implied volatility of options rarely correlates directly to the historical values. The differences are theoretically due to the market’s assessment of future uncertainty. However, the volatility of Silver is more than twice what you would expect to see in EUR/USD currency markets. Speculation or manipulation may be part of the cause. 

As demonstrated above, there are definite symmetries between trading modalities in both the Silver and the EUR/USD markets. Technical analysis and related trade indicators behave similarly also. However, knowledge, experience and the control of one’s emotions are paramount to success in both disciplines. One must develop a high degree of confidence in any new investment area before putting capital at risk. As with all investment decisions, preparation is key before execution.