Realized volatility, calculated from past price moves (a look backward). Comparing it with Implied Volatility (IV) tells you whether options are expensive (IV > HV) or cheap (IV < HV), which matters when choosing a strategy.
What is this volatility
Historical Volatility (Historical Volatility) measures what actually happened: the statistical swing in an asset's returns over a past window (usually 20 or 30 sessions), annualized. It is the record of realized movement, with no opinion and no forecast.
Historical vs. implied
They are the two banks of the market: historical is what happened, implied is what options price for ahead. The gap between them is the volatility risk premium. Implied usually sits above historical (the pay of insurance sellers). When the relation flips (realized above priced), the market was surprised and is repricing.
How it is used
A fair reference for pricing options: implied 45% on an asset that has moved 22% historically needs a justification (an upcoming event) or reads as expensive. It is also a ruler for setting stops and targets across the daily range, and a detector of regime change when the short-term historical jumps above the long-term one.
Hypothetical example
An asset's 30-session historical volatility is 18% while its one-month implied is 31%, with no visible event ahead. Options are selling fear that doesn't show in behavior. This is a testing ground for premium-collecting strategies. If the numbers were reversed, insurance would be priced below reality.
Common mistake
Assuming history will continue: it is a rear-view mirror, not a windshield. Regimes flip, and the calmest months sometimes precede the wildest. Use it as a reference for comparison, not a forecast for tomorrow.
Where to see it on the platform
Volatility tools show it next to implied volatility for each symbol, and the VRP index measures the gap between the two with a clear verdict.
