In today's market measure segment, Gad joined Tom and Tony to explore the relationship between historical volatility (HV) and implied volatility (IV) and discused step by step for getting the HV.

The key distinction: Implied volatility is calculated from current option prices representing expected future movement, while historical volatility is derived from past daily returns. Research shows IV overstates realized volatility about 85% of the time.

Using 10 years of SPY data, the team demonstrated how HV is calculated by taking rolling standard deviations of returns and annualizing them using the square root of 252 trading days. This calculation makes HV comparable to the 30-day expected movement reflected in IV.