How to get volatility of a stock? (2024)

How to get volatility of a stock?

You can use the standard deviation and variance of returns to create a basic measure of stock volatility. This measure captures variance in price changes over a certain period of time, so you can gauge how far from the mean the stock price tends to go (i.e. how volatile it is).

Volatility is determined either by using the standard deviation or beta. Standard deviation measures the amount of dispersion in a security's prices. Beta determines a security's volatility relative to that of the overall market. Beta can be calculated using regression analysis.

Calculating volatility using Microsoft Excel

Using data in Column C, calculate the interday change in the value of the index. Starting with cell D4, the formula is simply the current day's closing value divided by the previous day's closing value minus 1, or (C4/C3) - 1.

Beta: When it comes to finding the most volatile stocks, Beta is one of the most important indicators to consider. It measures a stock's volatility in relation to the overall market. A Beta of more than 1 signifies that a stock is more volatile than the market. High-beta stocks are usually considered riskier.

Volatility forecasting can work reasonably well—but measuring results is not as easy as it appears. Estimation methods have evolved from the 1980s through today as access to more data increased. Capturing both intraday and overnight moves is important for proper risk management.

Implied volatility is calculated by taking the market price of the option, entering it into the Black-Scholes formula, and back-solving for the value of the volatility. But there are various approaches to calculating implied volatility.

Using Google Sheets it is easy to calculate implied volatility of any option that is currently trading by using the OPTIONDATA formula. Just use =OPTIONDATA("OPTION SYMBOL", "iv") and the formula will return the result. The result will be returned as a decimal.

It is calculated by dividing the implied volatility of an option by the historical volatility of that security. A ratio of 1.0 means that the price is fair. A ratio of 1.3 implies that the option is most likely overpriced, and is selling at a price that is 30% higher than its real value.

As an investor, you should plan on seeing volatility of about 15% from average returns during a given year.

On the Portfolio page, under the "Momentum" tab, you can see the beta for stocks in your portfolio. Also, the Advance Chart (under the "Summary" tab on the symbol page) allows you to chart the ATR (Average True Range) for that stock (it is one of the "Indicators").

Where do you find volatility?

Volatility is a statistical measure of the dispersion of data around its mean over a certain period of time. It is calculated as the standard deviation multiplied by the square root of the number of time periods, T. In finance, it represents this dispersion of market prices, on an annualized basis.

Risk management is crucial in volatility trading, with strategies such as employing stop-loss orders and leveraging tools like the VIX to anticipate market fear and adjust trading positions accordingly.

Standard deviation is the most common way to measure market volatility, and traders can use Bollinger Bands to analyze standard deviation. Maximum drawdown is another way to measure stock price volatility, and it is used by speculators, asset allocators, and growth investors to limit their losses.

Opening a Long Call Position

This strategy shines in high volatility markets because larger price swings can lead to greater profits. Here's why: if the stock's price soars, your call option allows you to buy the stock at the lower strike price, then sell it at the current higher market price.

Finding the most volatile stocks is not very complex and no longer requires constant research or stock screening. Instead, you can set up and run an ongoing screener for stocks that are consistently volatile. StockFetcher is one example of a filter you can use to track very volatile stocks.

Using equity return data, we find that daily realized power (involving 5-minute absolute returns) is the best predictor of future volatility (measured by increments in quadratic variation) and outperforms model based on realized volatility (i.e. past increments in quadratic variation).

Factors Affecting Volatility

Changes in inflation trends, plus industry and sector factors, can also influence the long-term stock market trends and volatility. For example, a major weather event in a key oil-producing area can trigger increased oil prices, which in turn spikes the price of oil-related stocks.

You can find the implied volatility of a stock for different expirations using the Black-Scholes model. These implied ranges are based on annual expected moves by default. At tastylive, we use the 'expected move formula', which allows us to calculate the one standard deviation range of a stock.

The Cboe Volatility Index (VIX), widely considered to represent one of the most trusted gauges of investor sentiment, is defined as a measure of implied volatility of the S&P 500 Index (SPX) over the coming 30 days.

Does fidelity show implied volatility?

Fidelity.com provides a comprehensive page with implied and historical volatility data for multiple time periods.

Investors find implied volatility data for given stocks either from financial news websites or from online data brokerage firms. These online data brokerage firms sell implied volatility data by providing information about the stock that could be listed on their platforms of databases.

Volatility is measured as a widening of the range between a security's high and low price by comparing the gap between those two prices. An increase in the volatility indicator over a brief period can suggest that a bottom is nearby. An impending top may be indicated by a longer-term decline in volatility.

Calculate the average of the squared returns by adding them up and dividing by the number of periods (this is also known as the variance) Take the square root of the variance (also know as the standard deviation). This is your measure of realised volatility.