Daily Volatility (\(DV\))

Brian Lee
Aug 12, 2025

Daily volatility provides a statistical estimate of how much a stock’s price is expected to fluctuate within a single trading day. By applying this measure to the opening price, we can project an expected trading range for the day. This range helps assess whether a stock is likely to move beyond normal expectations, which can be useful for evaluating potential overpricing or underpricing.

  1. Calculate Daily Volatility, denoted as \(DV\), from implied volatility, Implied Volatility (\(IV\)) (\(IV\)): \[DV = \frac{IV}{\sqrt{252}} \div 100\] The historical measure 30-Day Historical Volatility (\(HV30\)) works with the same formula.

  2. Estimate the Expected Daily Price Range using the opening price as the statistical mean of the distribution:

    • \(DV_{low} = S_{opening} - S_{opening} \times DV\)
    • \(DV_{high} = S_{opening} + S_{opening} \times DV\)

where

Under the assumption of normally distributed returns, approximately 68% of the time, we expect the stock’s price to stay within the range defined by \(DV_{low}\) and \(DV_{high}\) during the trading day.

See also Daily Volatility Scaler (\(DV_{scaler}\)).