How Do You Calculate Stock Price Volatility?
In its simplest form, volatility refers to the variation in a stock price. Measuring stock-price volatility is particularly useful for an option trader looking to make short-term bets on the direction of a stock or for a portfolio manager who is trying to hedge against stock-price fluctuations. If you buy a call/put option, or an option to buy or sell a stock at a particular price, you want more volatility. More volatility increases the likelihood your “bet” on the direction of the stock price will be profitable. You can chart stock-price volatility using a calculator or a spreadsheet. Gather stock price information. You will need at least a month of daily stock price data (or 20 days); however, you will get the best results by using 6 months of data. If you don’t know how to do this, go to Yahoo! Finance, input the ticker symbol for your particular stock into “Get Quotes,” and click on “Historical Prices.” Copy and paste this information directly into a spreadsheet. Column A will refe
