Realized Volatility
How much an asset actually moved over a past window — the backward-looking twin of IV.
Definition
Realized volatility (also called historical volatility) measures the actual variability of an asset's returns over a chosen past period. It is typically calculated as the annualised standard deviation of daily log returns, expressed as a percentage per year.
Why it matters
Realized volatility is the reality check for implied volatility. Option sellers want implied volatility to exceed the volatility that ultimately occurs, while buyers want the opposite. Comparing recent realized volatility to current implied volatility tells you whether options are pricing in more or less movement than the market has actually been delivering — a core input for volatility trading and for sizing risk.
Example
Suppose Nifty's daily returns over the last 20 sessions have a standard deviation that annualises to about 12%, while at-the-money options imply 16%. The market is pricing in more future movement than Nifty has recently shown, so a seller might view options as relatively rich — provided no major event is expected to spike actual movement.
Formula
Realized volatility = standard deviation of daily log returns x square root of 252 (the approximate number of trading days in a year), expressed as an annualised percentage.
See it live
TradePulse shows live implied volatility on the option chain so you can compare it against the index's recent realized moves.