Volatility premium charts
Three charts of one symbol's volatility risk premium, the two volatilities behind it, and how unusual today's value is.
What it answers
Three charts show one symbol's volatility risk premium (VRP): how far the options market prices volatility above the volatility the stock has shown.
- VRP Series shows whether options are priced high or low now, and how that has changed over time.
- IV vs HV shows which side moved: implied volatility, or the stock's own moves.
- Z-Score Histogram shows whether today's VRP is unusual for the symbol.
How to read it
- 1The VRP Series header. Its menu contains Year overlay, Sigma bands and Regime.
- 2The line is VRP for each trading day, in percent. Above the dashed zero line, options are priced above the moves the stock has made.
- 3The IV vs HV header. Its menu contains the Series choice.
- 4The two lines are 30-day implied volatility and 30-day historical volatility, in percent. VRP measures the gap between them.
- 5The Z-Score Histogram header. Its menu contains Year overlay, Zones and Depth.
- 6Each bar is that day's VRP z-score. Bars at or above zero use one colour; bars below zero use another.
VRP
VRP is implied volatility divided by historical volatility, minus one. A VRP of 25% means that implied volatility is 1.25 times historical volatility. A day with no historical volatility has no VRP value.
The Volatility Board shows its premium as ex-earnings implied volatility minus the forecast of historical volatility, in vol points. Its values are not comparable with VRP.
Z-score
The z-score on these charts compares a day's VRP with its mean over the
last 20 trading days. The Calculator's zscore function accepts any
window.
| z-score | Band |
|---|---|
| above 1 | rich |
| above 2 | extreme rich |
| -1 or below | cheap |
| -2 or below | extreme cheap |
Each point uses the date of its close. The data updates once a day before the open, so the last point is the previous trading day.
Controls
Open a chart's menu to change its view. Each choice redraws data the chart already has.
- Year overlay: draws one line per year, aligned by trading day.
- A year overlay turns off Sigma bands, Regime, Zones and Depth.
- Sigma bands: draws the 20-day mean of VRP, with one and two standard deviations on each side.
- Regime: shades the area above zero in one tint and the area below zero in another.
- Series: select All, IV, HV or Spread.
- Spread: draws implied minus historical volatility for each day.
- Zones: shades the bands beyond 1 and 2 standard deviations.
- Depth: colours each bar by its distance from zero, in steps of 1, 2 and 3.
Use the header search to select the symbol. COMPARE draws up to three symbols on one axis. Range sets the start of the chart.
| Control | What it does |
|---|---|
| VRP Series | |
| overlay | Year overlay, one line per year |
| bands | Sigma bands around the 20-day mean |
| regime | Regime shading above and below zero |
| IV vs HV | |
| series | Series, which lines draw |
| Z-Score Histogram | |
| overlay | Year overlay, one line per year |
| zones | Zones beyond 1 and 2 standard deviations |
| depth | Depth, bar colour by distance from zero |