So there is IV for the stock and a separate IV for each option contract? Is it the same logic for the IV of the contract compared to historic volatility? That is, if the IV of the option contract is greater than the stocks historic volatility then the contract could be over priced?
Not really, the volatility of an option is essentially how much "EXTRINSIC" value is in that option. In other words, how OVERPRICED it is. With stock, there is NO extrinsic values to anything. The volatility of a stock is essentially a different type of volatility. It measure up and down price movement which can and does impact the options IV, but they are 2 separate measures and I am not aware of any way to evaluate one off of the other.
So there is IV for the stock and a separate IV for each option contract? Is it the same logic for the IV of the contract compared to historic volatility? That is, if the IV of the option contract is greater than the stocks historic volatility then the contract could be over priced?
Not really, the volatility of an option is essentially how much "EXTRINSIC" value is in that option. In other words, how OVERPRICED it is. With stock, there is NO extrinsic values to anything. The volatility of a stock is essentially a different type of volatility. It measure up and down price movement which can and does impact the options IV, but they are 2 separate measures and I am not aware of any way to evaluate one off of the other.