Historical Volatility
A statistical measure of the actual price fluctuations of the underlying asset over a specific past period.
Explanation
Historical volatility (HV) is calculated from past price data, typically using the standard deviation of log returns. It is expressed as an annualized percentage. Comparing HV to implied volatility helps traders identify whether options are relatively cheap or expensive. Common lookback periods are 20, 30, and 60 days.
Example
AAPL has a 30-day HV of 22% but implied volatility of 30%, suggesting options are relatively expensive compared to recent actual movement.