Historical Volatility Demystified, Part IV……by Tyler Craig

• Posted by Adam Warner
• on September 15th, 2009

We’ve finally reached the conclusion of our short, yet to some too long, expedition into the volatility arena. As I often provide commentary on HV, I thought it useful to offer an in depth overview of its different nuances. So with out further ado, here’s part IV.

After understanding the basic definitions and nuances of how historical volatility is calculated, most traders naturally wonder how to determine whether it is high or low. The first thing to recognize is there are no absolute levels that are considered “high” or “low” for HV. Each individual index or stock exhibits varying levels of HV. High HV for Wal-Mart (WMT) may very well be low HV for Apple Inc. (AAPL). The most common method for determining whether HV is high or low is comparing current HV levels to a historical range of HV levels. For example, over the last year the 30 day HV of AAPL has ranged between 23% and 107%. Because the current level of 30 day HV resides at 26%, it is fair to say that it is low……

Click here for balance of post.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus