The measure of the fluctuation in the price movement in an security over a period of time. Volatility is one of the most important components in the theoretical valuation of an option price.Historical Volatility: the standard deviation of the underlying security (closing) price movement over a period of time (typically 21-23 days)Implied Volatility: the calculated component derived from the option price when using the Black-Scholes Option Pricing model. Where there is a significant discrepancy between Implied and Historical Volatility then there is the opportunity for the trader to take advantage of this.
