volatility as standard deviation

Discussion in 'Options' started by tradingcards, Nov 15, 2007.

  1. Has anyone read Natenberg's Option volatility & pricing? He talks about defining a volatility number associated with a stock as a one standard deviation price change, in percent, at the end of a one-year period.

    He says, "suppose a stock is currently trading at 100 and has a volatility of 20%."

    How did he get 20% as the stock's volatility?

    Is 20% the distance from the 52 week low to the 52 week high? Or is 20% the difference in price from exactly one year ago?

    please help. thank you
  2. MTE


    He writes: "Suppose...". It's an example. He jsut made up that number.

    Volatility is measured by standard deviation on an annual basis. Standard deviation is a statistical measure, which measures the distribution of returns around the mean.
  3. avarus