Is realized volatility the same as historical volatility?

Realized volatility is calculated from underlying price changes over a certain period (exact calculation explained here). If this certain period is in the past, we call it historical volatility. If it is in the future, we call it future realized volatility.

What is IVR volatility?

Implied Volatility Rank, or IV Rank & IVR for short, tells us whether implied volatility (IV) is high or low in a specific underlying based on the past year of IV data. For example, if XYZ has had an IV between 30 and 60 over the past year and IV is currently at 45, XYZ would have an IV rank of 50%.

What does the VIX tell us?

The Cboe Volatility Index, or VIX, is a real-time market index representing the market’s expectations for volatility over the coming 30 days. Investors use the VIX to measure the level of risk, fear, or stress in the market when making investment decisions.

How do you calculate historical volatility?

Historical volatility is calculated by taking the standard deviation of the natural log of the ratio of consecutive closing prices over time. This is multiplied by the square root of the number of bars in a year so it can be compared to other time spans and multiplied by 100 to convert it to a percentage.

What is the formula for implied volatility?

Implied volatility is calculated by taking the market price of the option, entering it into the B-S formula, and back-solving for the value of the volatility.

What is considered a high implied volatility?

High implied volatility means that the security is expected to have large fluctuations in its price, or that there is uncertainty related to the security. Low implied volatility means that the security is not expected to have large fluctuations in its price, or that there is little uncertainty related to the security.

What exactly does implied volatility mean?

Implied volatility is one of the deciding factors in the pricing of options. Options, which give the buyer an opportunity to buy or sell an asset at a specific price during a pre-determined period of time, have higher premiums with high levels of implied volatility, and vice versa. Just as with the market as a whole, implied volatility is subject to unpredictable changes. Supply and demand is a major determining factor for implied volatility.