Concept
Realized Volatility
Realized Volatility, also known as realized variance, is a Volatility concept. The Library holds 7 implementations, each one a working definition you can pull into Quant.
intraday-summed
Top Realized Volatility indicators
7 total
What is Realized Volatility?
Realized volatility is the volatility an asset actually printed over a past window, computed from observed returns rather than from option prices. In its strict form, realized variance sums squared returns sampled at a higher frequency than the evaluation window (five-minute returns summed across a day, for example), and realized volatility is the square root of that sum, usually annualized. Because it aggregates squared returns directly, the estimate converges on the true variation of the price path as sampling gets finer, until bid-ask bounce and other microstructure noise begin to dominate.
On charts the term is used more loosely: most implementations take the standard deviation of daily log returns and annualize it by the square root of periods per year, which is properly close-to-close historical volatility. Both usages are common, so check the formula before comparing numbers. Either way, realized volatility is the backward-looking anchor of the volatility toolkit: it is what sizing models scale against, what regime filters classify, and the measured leg of the spread against implied volatility that option traders watch.
How traders use it
- Sizing positions: volatility-targeted sizing divides a fixed risk budget by current realized volatility, so exposure shrinks when the tape gets wild and grows when it goes quiet.
- Classifying regimes: comparing today's reading against its own history (a volatility percentile over the past year, for instance) labels the environment quiet or stormy and tells you which playbook applies.
- Benchmarking implied volatility: when options price substantially more volatility than the market is realizing, sellers see a premium and buyers a headwind; the spread between the two is itself a monitored quantity.
- Feeding forecasts: rolling realized measures are the raw input to EWMA and GARCH-style models, which weight recent squared returns more heavily to estimate the next period's volatility.
Realized Volatility vs. neighboring measures
Close-to-close Historical Volatility: Uses one close-to-close return per bar and takes a sample standard deviation over a window. Strict realized volatility instead sums squared intraday returns, extracting far more information from each day; in loose chart usage the two names blur into one.
Implied Volatility: Backward versus forward: realized volatility measures what already happened, while implied volatility is backed out of option prices as the market's priced expectation of what comes next. The gap between them is tracked as the volatility risk premium.
EWMA Volatility: A rolling realized calculation weights every observation in the window equally and drops each one abruptly at the window's edge. EWMA decays weights exponentially, so the estimate reacts faster to fresh shocks and avoids lookback-edge artifacts.
More Realized Volatility implementations
Related concepts · Volatility estimators
Concept family
Volatility
56 concepts mapped · 43 in the Library
Realized Volatility FAQ
Is realized volatility the same as historical volatility?
In everyday chart usage, yes: both usually mean the annualized standard deviation of past returns. In the stricter academic sense they differ: realized volatility is the square root of summed squared intraday returns, estimating a single day's variation, while historical volatility takes one return per bar over a longer window. Check which formula an implementation uses before comparing values across sources.
How do you annualize realized volatility?
Multiply the per-period figure by the square root of the number of periods in a year: roughly the square root of 252 for daily equity returns, or of 365 for markets that trade every day. The scaling assumes returns are independent across periods, which is an approximation, so treat annualized numbers as a shared yardstick rather than a precise forecast.
Does high realized volatility tell you which way price will go?
No. Realized volatility is direction-blind: it measures the size of moves, not their sign, and strong rallies and sharp selloffs can print similar readings. It earns its keep in sizing, stop width, and regime classification, with directional views coming from trend or structure tools rather than from the volatility number itself.
Build Realized Volatility your way.
Quant writes, tests, and refines it with you — then it runs on LuxAlgo charting or ports to TradingView.