Implied Volatility vs. Historical Volatility
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- เผยแพร่เมื่อ 8 ก.พ. 2025
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Implied volatility (IV) and historical volatility (HV) are two key options trading terms to know and understand.
In this video, we explain what implied volatility and historical volatility represent, and why they're useful.
We'll go through multiple examples and data visualizations to explain implied volatility and historical volatility, including a chart that demonstrates a clear relationship between IV and HV.
We accomplish this by calculating the 21-day historical volatility of the S&P 500 Index (SPX) and comparing that to the Cboe VIX Index closing values on each trading going back to 1990.
Lastly, we'll explore whether or not current levels of market volatility have any relationship with the highest VIX Index level seen over the following month.
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Brilliant, love the detail and analytical process you go through.
great vid!! love the HV VIX subsequent month graph!! Thanks for sharing that.
hey chris....nice explanation on a tricky concept of IV...I have also gone thru your other videos and they provide useful knowledge in options.....ur work is awesome
Thank you for the awesome feedback, Chirag! I appreciate the kind comment and I'm glad you're enjoying the videos!
-Chris
I’m a Rates trader at a investment bank but I don’t trade rates vol and trying to get exposure to that asset class and your video is helpful
Very nice! I'm glad the video helped. I am sure your bank can help you learn about the specifics related to what they trade but let me know if you have any questions. I'd be happy to help if I can.
-Chris
they do but I'm trying to move to the buy side to prop trade rates vol lol... luckily theres been great volatility on the rates space so it's been a good year so far but being able to trade volatility is a great exposure especially when i can trade fx vol, rates vol, index vol, single stock vol as it's similar to most aspect. thanks again.
so it is fair to say that its what happened in the last month dirves the VIX , the historical and also the imlied volatility?
Great video. Just a quick question. Since IMP Vol is derived from options or options trading still a bit hazy on that but if you were to buy options in a market or stock that wasn't being traded heavily because it had been forgotten or was overlooked and not heavily traded at the time. It would have a lower implied vol even though it could still move a lot? You mention that implied vol also compares across stocks. How does this work?
Excellent refresher course. Thank you for sharing. I typically look at extrinsic value. I take a view on a stock whether it's going higher or lower. You just need to get approved for trading naked puts.
Thank you for watching!
With which modell are the american options values at 4:03 calculated?
Excellent
Thanks For the great content as usual. I do have two questions. Is HV not the same as SDV that almost all charting tools provide? and second question: In theory, it seems that when IV is higher than HV and the HV trend is downward is the best time to sell options. Have you had any experience with this? Is this not a more objective way of looking at it than IV rank?
you want to sell volatility when it is high overvalued=sell high and buy low. IV percentile! one of the best tools for this!!
hey Chris,suppose stock is @ 100$ and I want to trade above 100$ strike price e.g. 120$,130$ so how to choose strategies according to iv,stdev, please explain
Abhishek,
Great question but unfortunately there is no perfect way to choose a strategy based on those parameters.
Choosing a strategy comes down to what you believe will happen with the stock price in the future (over your trade time frame). Once you have that in mind, IV can play a role in determining which strategy you think is best based on the current IV and what you think will happen to the stock price (and subsequently IV) in the future.
It's a vague answer but I hope it helps.
-Chris
thanks Chris for ur reply.. I got ur point..
@@projectfinance It does. thank you Chris.
Great video man
Thank you, Max! I appreciate your comment.
-Chris
so the people driving up the price by buying the options increases the volatility? i always thought it was derived from math and the historical volatilty
Only if it was more visible