Volatility
Volatility measures how much and how quickly a price moves up and down, usually as the annualized standard deviation of its returns.
High volatility means bigger swings and more risk, but also bigger opportunities. It's a key input to option prices.
In Journey Shares
Each person's option prices use their own measured volatility.
Related terms
- Standard deviation: Standard deviation measures how spread out a set of numbers is around its average.
- Implied volatility: Implied volatility is the size of future price swings that an option's market price implies.
- Black-Scholes model: The Black-Scholes model is a formula for the fair price of a European option using five inputs: the stock price, strike, time to expiry, risk-free interest rate and volatility.
- Beta: Beta measures how much a stock tends to move compared with the whole market: a beta of 1 moves with the market, above 1 moves more, below 1 moves less.
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