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Historical volatility (HV)

How much the stock has actually moved in the past, measured from its price history — the counterpart to implied volatility.

Historical volatility (HV) measures how much a stock's price has actually moved over some past window, usually expressed as an annualized percentage. It's backward-looking: you compute it from the daily returns you can see on the chart, unlike implied volatility, which is the market's forecast baked into option premium.

In practice, traders use HV as a reality check against implied volatility. If a stock's 30-day HV is around 20% but the options are pricing in 35%, the market expects bigger swings than the recent past delivered, so premium looks rich for anyone thinking about selling. Say a $100 stock has an HV of 20%: roughly speaking, a one standard deviation move over a year is about $20, which helps you judge whether a strike is realistically reachable.

The common mistake is treating HV as a prediction. Volatility clusters and shifts, so a quiet stock can wake up fast around earnings or news. HV tells you what happened, not what comes next, and it will always miss a regime change until after it starts.

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