Accounting for IV in Standard Deviation Calculation ?

Discussion in 'Options' started by Aston01, Mar 15, 2012.

  1. Aston01


    For some reason or another I can't seem to wrap my head around this equation, and was hoping someone here that is more mathematically inclined could possibly see where I am going wrong.

    I am trying to factor in the IV in my determination of a 1 standard deviation. Currently as it is being calculated it determines standard deviation without IV taken into consideration, but I am not quite sure how I would add to the calculation to account for say 32% IV .

    I am using the calculation in TradeStation so I have included how the function is formatted

    Breakdown of StandardDev Function
    StandardDev(Price, Length, DataType)

    My Current Calculations
    OneStdDev = StandardDev(Log(Close[1]/Close[2]), 20 ,2)*Close[1];

    If OneStdDev > 0 then Spike = (Close-Close[1])/OneStdDev
    Else Spike = 0 ;

    Any suggestions ?
  2. If you're calculating volatility of the asset then you don't need to factor in anything. You have the price series, the period over which you wanna calculate the volatility and that's it.
  3. Aston01


    I think I figured out where my error was...I was trying to calculate Std Dev based on volatility and instead I was calculating volatility.