Historical Volatility
How much the underlying has actually moved — the realised, backward-looking measure of risk.
Definition
Historical Volatility (HV), also called realised or statistical volatility, measures how much an underlying's price has actually fluctuated over a past window. It is the annualised standard deviation of daily logarithmic returns — a pure, backward-looking number with no view on the future.
Formula
HV = standard deviation of daily log returns × √252, where log return = ln(today's close ÷ previous close) and 252 is the approximate number of trading days in a year.
Why it matters
HV is the benchmark against which option prices are judged. By comparing HV with implied volatility, traders gauge whether options are richly or cheaply priced: when IV sits well above HV, sellers are being paid more than recent moves justify; when IV is below HV, buyers may be getting a bargain.
Example
If NIFTY's daily returns over the last 20 sessions had a standard deviation of about 0.8 percent, its 20-day HV is roughly 0.8 percent × √252 ≈ 12.7 percent annualised. If options on NIFTY are trading at an IV of 18 percent, the market is pricing in noticeably bigger future swings than the recent past delivered (illustrative figures).
See it live
Compare realised moves against live IV per strike on TradePulse's option chain.