What does implied volatility indicate regarding a security?

Implied volatility is a critical concept in options trading and provides valuable insight into the market's perception of future volatility for a security. When a security has high implied volatility, it suggests that the market expects significant price fluctuations in the future. This can indicate a higher level of uncertainty or risk associated with the underlying security. Traders often use implied volatility to gauge potential price movements and assess the degree of risk involved in holding or trading a particular option or security.

In contrast, future dividends relate to expected cash flows from the underlying security, liquidity pertains to how easily a security can be bought or sold without impacting its price, and the current market trend reflects the overall direction of the market or a specific security's price movement. While these aspects are important in analyzing a security, they do not directly address the risk factor that implied volatility specifically indicates. Thus, the focus on risk and uncertainty in the correct answer aligns with the fundamental role of implied volatility in financial analysis.