volatility confusion between ib and ivolatility

[MasterAtWork]

Quote from newguy05:

i got the sd part, but gonna need some starbucks before trying to understand the rest of what you are saying

But fyi in IB: under Configure -> Volatility and Analytics -> Volatility Units -> you can change it from Daily (default) to Annual.

Then the numbers will match the ivolatility model very closely.

You will often read people talking about 160% implied volatility during 1987 crash. Again, it's "just" a 10% daily volatility (standard deviation) OR 8% daily mean absolut deviation.

To keep an intuitive way with numbers, a rule of thumb is:

20% implied volty means 1% daily mean absolut deviation
40% implied volty means 2% daily mean absolut deviation
60% implied volty means 3% daily mean absolut deviation
100% implied volty means 5% daily mean absolut deviation
....

It's the simplest way to think about volty. and to understand what does it mean. No broker calculator, no website model needed.

Cheers

Maw

 

[TYtrader]

Quote from newguy05:

it states HV is at 7.69% and IV 5.36%.


thanks

this is way too low for ETFC. It would never be this low unless it was being acquired or for some reason the stock simply stopped moving. the first numbers seem more accurate. might have been a glitch in IB's system.