Volatility Help
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The volatility reports show the most volatile stocks and options and the change in volatility for stocks and options. Report results can be filtered by the minimum stock price. This is useful in removing stocks from the report that have few, if any, option contracts near the money.
When reporting the change in volatility, results may be ordered by the largest rise in volatility, the largest drop in volatility, or the largest of both combined.
Each report shows the underlying stock symbol, security name, and underlying price. The option reports also identify contracts by symbol, expiration month and year, strike price, and put versus call. The implied volatility or change in implied volatility is also shown.
What is Volatility?
Volatility is a measure of how likely a stock price will change. One method of measuring volatility, Historical volatility , is computed by examining past changes in the underlying stock price. Historical volatility can be computed over different periods of time. The 30 day historical volatility is the measure of volatility using prices for the past thirty days. The 30 day historical volatility measure may be quite different from the 365 day volatility, since a stock which is flat most of the year may have had recent unusual activity. Those measures of volatility can be used to imply the likelihood of future price movement over the next 30 or 365 days, respectively - assuming past volatility can predict future volatility. More Than One Volatility The volatility of a stock can be computed from an option price. But a stock can have many options, and the computation of the volatility may be different for each option. These differences, particularly when examined along with volume and open interest, can reveal which options are most in demand. If calls are more desirable than puts, it indicates that the public sentiment is bullish on the underlying stock. Commonly, demand for calls will outweigh puts or vice-versa, and this skew shows investor bullishness or bearishness. The second step to profitable trading is to assess the likelihood of a stock moving in a particular direction. To see a graphical representation of the variances in option prices, use the Volatility Skew feature. Putting Volatility to Use Once a stock that is likely to move has been identified and the likely direction has been determined, an appropriate trade must be selected. To learn about the probabilities of profiting from a trade and picking the best trade, read about our exclusive Trade Finder.