Realized Volatility

Actual historical price volatility observed

What is Realized Volatility?

Realized Volatility The actual historical volatility of an asset measured from observed price changes over a specific period. Typically calculated as the annualized standard deviation of daily log returns. Comparing realized volatility to implied volatility reveals the volatility risk premium and helps identify whether options are overpriced or underpriced.

Complete Definition

The actual historical volatility of an asset measured from observed price changes over a specific period. Typically calculated as the annualized standard deviation of daily log returns. Comparing realized volatility to implied volatility reveals the volatility risk premium and helps identify whether options are overpriced or underpriced.

Example

AAPL's 30-day realized vol is 22%, but implied vol is 28%. The 6-point spread suggests options are pricing in more volatility than has actually occurred.