Stock Option Terms: Volatility (Options)

Volatility:
The measure of the fluctuation in the price of an option or security of a length of time. There are two key types of volatility; historical volatility and implied volatility.

Historical Volatility:
the standard deviation of a security over a period of time

Implied Volatility:
the calculated expected volatility implied by options prices based on the Black-Scholes Option Pricing Model. Option traders can take advantage of large discrepancies between historical (actual) volatility and implied volatility (predicted).