What Is the Difference between Implied and Historical Volatility?

Historical volatility (HV) is a backward-looking measure, calculated from the past price movements of the underlying asset over a specific period. Implied volatility (IV) is a forward-looking measure, derived from the current market price of an option.

IV represents the market's collective expectation of the underlying asset's volatility over the life of the option. The difference between the two is often a key signal for traders.