Ask the Institute

Ask the Institute Archive

DATE: May 28, 2013

QUESTION:

Can you explain, in simple terms, the concept of Volatility?

ANSWER:
Simply put, Volatility means movement. The term movement or Volatility refers to the fluctuation of stock or index prices. In the options industry, there are three ways to think about movement. First, there's movement in the "past" called Historical Volatility. Second, there's movement in the market "today" called Actual Volatility. Third, there's the expectation of what movement will be in the "future" called Implied Volatility. To learn more about the concept of Volatility, view this week's segment of "Ask the Institute."

  VIX Snapshot

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