Glossary
Volatility: definition
Volatility describes how widely prices move. Realised volatility is what already happened. Implied volatility is the level of movement embedded in option prices. Neither is a forecast WiT Markets is endorsing.
In practice
High volatility means larger swings, which means a given position size hurts more. It does not mean the expected return has risen to compensate you. Option premiums tend to be higher when implied volatility is higher, so insurance costs more after the move has started. Low volatility can lull people into larger positions just before it changes. Volatility is a sizing input, not a signal with a moral.
A worked example
A share that moves 1% on a quiet day and 4% after a shock has changed the cash loss on the same holding. A stop and a position size chosen in the quiet period are then the wrong size.
Related
Sources and review
Last reviewed: 2026-10-13. Next review due 2027-04-13. Status: editorial review of this page, not a live verification of every third-party fee.
Author: WiT Markets Editorial, Editorial desk. The WiT Markets editorial desk writes explanatory pages, comparison context and research notes. It separates sourced facts from items that are not confirmed, and it does not provide personal recommendations.
Reviewed by: WiT Markets Research Review.
Primary and regulatory sources
- Options Clearing Corporation — checked 2026-10-13
- Investor.gov — checked 2026-10-13