What Is the Difference between Historical Volatility and Implied Volatility in This Context?

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

Option time value is primarily driven by IV, as it reflects the current consensus on future uncertainty, not past movement.