## Definition and explanation of historic volatility

As the name suggests, **historical volatility (HV)** is **calculated by using past prices** of a given financial asset (e.g., securities, bonds, market indexes, commodities) over a given period of time.

It is also known as **statistical volatility (SV) **because the most common way to calculate historic volatility is using the standard deviation of the average price.

A volatile market has a larger standard deviation and thus a higher historical volatility value. Conversely, a market with small fluctuations has a small standard deviation and a low historical volatility value.

The **standard sample period** for the calculation is **one-year** but historical volatility can be applied to any period of data. Option traders can use a period equal to the number of days left until expiration.

## How to read historical volatility?

Historical volatility tells the expected price range of an asset over a specific time frame with a probability of 68%.

For example, if a specific stock has a price of $100, and the historical volatility of the stock is 10% over the past 30-days, one can expect the stock price to be in a range of $90 to $110 in the next 30-days with a probability of 68%.