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Implied Volatility and Stock Market Direction is a subject of curiosity for many stock market experts and gurus. A lot of research is done to find out the correlation between the volatility or Implied Volatility and Stock Market Direction.

The basic thumb rule suggests that an increase in volatility or implied volatility means that the market should FALL and cool off or decrease in volatility means the market should rise. However, this correlation does not work always. The correlation between the Implied Volatility and Stock Market Direction is situational and dependent on the market.

With the help of the correlation coefficient function, you can find the current or historical correlation between two variables and this can validate the existing theory i.e. whether it is correct or not.

Also, there should be harmony in the analysis of implied volatility i.e. if there is a strong positive correlation for Call side implied volatility then there should be a strong negative correlation for put side implied volatility then only the market will move up. If there are confusing or MIXED signals then it is better to avoid the trade.