The historical volatility of an investment is evaluated by examining market movements over a specific period of time. Because implied volatility is not forward-looking, it is less commonly used than implied volatility. A security's price can rise faster than usual when historical uncertainty grows. There is a sense of impending or recent change. However, a drop in past variances suggests that all uncertainty has been eliminated and things have returned to normal. Although this estimate is subject to intraday volatility, it is often used to determine the difference between closing prices.


A contract's volatility can be assessed over a ten- to one-hundred-and-eighty-day trading period. By evaluating percentage changes over lengthy periods of time, it is possible to represent historical changes in maps that clearly reveal price peaks and troughs, and investors can gain insight into their option bets' relative pricing. A firm that experiences higher-than-normal volatility, for example, if the average historical volatility over 180 days is 25% and the number for the prior 10 days is 45 percent.