## Overview

Volatility is an important factor in an options price.

Put simply, volatility is a measure of how much the underlying stock price is fluctuating, or is likely to fluctuate.

There are two measures of volatility : **Historical** and **Implied**

#### Historical Volatility

**Historical Volatility** (also known as **Statistical Volatility**) calculates the average price movement of an underlying stock over a specified period of time.

It does this by determining the range of stock price movement within a set period and using this to establish a mid point. The percentage of movement from the midpoint to either extreme gives the historical volatility of the stock price within that period.

Your SOFTWARE's volatility chart can display a number of **Historical Volatility** plots, each using a different calculation period.

#### Implied Volatility

**Implied Volatility** calculates the average price movement of all options with the same strike price and expiry date over a specified period of time. A number of different factors are included in this complex calculation, also referred to as a “pricing model”.

An **Average Implied Volatility** of all of the options available for an underlying security is calculated on a daily basis. It does so by calculating the implied volatility of each option for that security, discarding those that are very deeply in- or out-of-the-money and adding a weighting to those that are at-the-money and closest to expiry.

The **Volatility Chart** can display a number of **Average IV** plots for different periods or different groups of options.

This allows users to compare changes to the **Average Implied Volatility** of the options with the performance of the **Historical Volatility** of the underlying instrument.

For information on setting the parameters for the periods or groups to be averaged, refer to the Volatility Charts - Parameters and Appearance topic.

### Volatility Chart Topics

Click on the following links for more information on these topics:

## Related

- OptionGear Screens
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- Fair Value Calculator
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- Model or Natural Price Valuation
- Option Scan Types
- Historical Volatility

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