Distinguish between Historical Volatility and Implied Volatility (IV)

Historical volatility (HV) is a backward-looking measure, calculated based on the underlying asset's past price movements over a specific period. Implied volatility (IV) is a forward-looking measure, derived from the market price of the option, representing the market's expectation of future price volatility.

IV is the input traders are most concerned with, as it directly affects the option's premium.