OptionAutomator Options Trading Glossary:

Definition, Examples & Resources:Historical Volatility'

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What is Historical Volatility in Options Trading ?

Historical Volatility
The past measurement of the volatility (average deviation from the average price) of any security over a given timeframe. In general, the higher the underlying's historic volatility the riskier the security.


How to Use in Your Brutus Options Ranker Strategy


You can add historic volatility to your Brutus Options Ranker strategy.  This criterion is often added in conjunction with implied volatility.  For example:

  • With net-short options trading setups, you can look to minimize historic volatility while maximizing implied volatility.  This gives a strong indication that the option or spread has rich premium and therefore is a good sell candidate.
  • With net-long options trading setups, you can look to maximize historic volatility while minimizing implied volatility.  This gives a strong indication that the stock or ETF has historically moved more than priced into implied volatility.

However you use the measure, it is important to remember that historic volatility is constantly changing and is not always a good prediction of future volatility.  For example, a stock may have just come out of an earnings announcement and therefore reports high historic volatility but is now in consolidation and may trend fairly neutral for some time.

Where to find Historical Volatility in the Brutus Options Ranker Criteria Panel

Historic Volatility can be found on the Strategy Tree Builder page within the Brutus Options Ranker under the Criteria List and the Volatility Panel

Video on Historical Volatility

Broader Term

  • Volatility


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