How to Use Implied Volatility to Forecast Stock Price

Find a source for implied volatility information. Your online brokerage account will provide historic and implied volatility figures for any stock with options trading against the share price. Another volatility product is the Chicago Board Options Exchange Volatility Index, commonly called the VIX. The VIX can be easily charted and used to predict turning points in the overall market.
Compare the current level of implied volatility with the historic volatility for an individual stock. For the VIX, compare the current level to the average over the last six months to a year. You want to determine whether the current level of implied volatility is above or below historic levels and the magnitude of the departure from the norm.
Use the implied volatility deviations as signals for future stock price action. High implied volatility is usually a bearish signal, forecasting a pending decline in stock prices. Low volatility occurs when the market or stock prices are in an upward or bullish trend.