0
$\begingroup$

I know that implied volatility is the result of backing volatility out of any one of the many options pricing calculations.

However, I've noticed that on ThinkorSwim and other platforms they also have implied volatility, and historical volatility of the stock itself.

Is this a weighted average of IV of all active contracts, or do they actually mean a rolling volatility like yang-zhang? "Implied Volatility" of a stock itself seems like a weird concept to me, mostly because you can trivially calculate volatility directly.

Improve this question
$\endgroup$
2

1 Answer 1

Reset to default
3
$\begingroup$

Implied Vol is model dependent, generally the black scholes model. If you have many options, with the same expiry, you get vol curve. you can also get vol surface if you have options with different expiry in addition to strikes.

Realized vol generally is the standard deviation of closing prices of the stock for a number of days. So you can have 1-month realized vol or 1 year realized vol. These numbers are annualized.

Also, implied vol is not equal to realised vol. IV is sort of a forward looking measure. Imagine what happens during results season when the IV of options increase due to uncertainty of the announcement.

Improve this answer
$\endgroup$
3
  • $\begingroup$ So is the "IV" the ThinkorSwim platform talks about a misnomer and it's actually realized volatility? $\endgroup$
    – user20664
    Feb 17, 2017 at 7:51
  • $\begingroup$ I dont know about that platform, but if it is options, then it would be IV of the option. Also, realised vol is a measure of the stock, where as IV is that of an option $\endgroup$
    – nimbus3000
    Feb 17, 2017 at 7:52
  • 2
    $\begingroup$ I am slightly familiar with TOS from a prior job. This link defines IV on their platform: tlc.thinkorswim.com/center/charting/studies/studies-library/G-L/… There is lots of info in their library about every metric they offer. $\endgroup$
    – amdopt
    Feb 17, 2017 at 13:28

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.