How Can a Trader Use the Difference between HV and IV to Formulate a Trading Strategy?

A trader can look for discrepancies between Historical Volatility (HV) and Implied Volatility (IV). If IV is significantly higher than HV, the market is overestimating future volatility, suggesting the options are overpriced; the trader would sell volatility (short options).

If IV is significantly lower than HV, the market is underestimating future volatility, suggesting the options are underpriced; the trader would buy volatility (long options).