Historical Volatility (HV), also known as realised volatility or statistical volatility, measures the actual price fluctuations of a security over a specified past period — typically expressed as an annualised standard deviation of daily logarithmic returns. It quantifies how much the price of an asset has actually moved in the past, as opposed to Implied Volatility (IV), which reflects the market's forward-looking expectation of future price movement embedded in option prices. HV is calculated by computing the daily log returns (ln of today's price divided by yesterday's price), calculating their standard deviation over the chosen lookback period (commonly 10, 20, 30, or 90 days), and then annualising by multiplying by the square root of 252 (trading days per year). In Indian options markets, comparing HV with the current IV of Nifty 50 or Bank Nifty options is a fundamental input for volatility trading decisions — when IV significantly exceeds HV, options are considered expensive (favouring selling strategies like short straddles), and when IV is below HV, options are cheap (favouring buying strategies). Historical volatility also informs position sizing — higher-volatility stocks require smaller position sizes to maintain consistent portfolio risk levels.
For android only
