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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.
OPTION PRICING CALCULATOR USED:
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