The Triad

The volatility an instrument actually exhibited over a past window, computed from its returns.

Backward-looking and fully observable, unlike implied volatility. The window length is a choice, and a twenty-day and sixty-day figure for the same instrument can tell different stories on the same day.

The volatility implied for a future period, extracted from the difference between two expiries.

If a one-month and a three-month option both trade, the pair implies a figure for the two months in between. It is a derived rate rather than a quoted one, and it inherits the assumptions of the extraction.

The persistent tendency for implied volatility to exceed the volatility subsequently realised.

Usually explained as compensation paid for bearing the risk of a large move. It is a long-run average, not a rule: the periods when it inverts are precisely the periods that matter most.

Implied volatility mapped across every strike and every expiry at once, forming a surface rather than a single number.

Skew is one slice of it across strikes; term structure is the other slice across time. Talking about the implied volatility of an instrument, singular, is always a simplification of this surface.

Two ways of expressing where current implied volatility sits relative to its own recent history.

Rank compares against the high-low range of the period; percentile counts how many days sat below the current reading. They can disagree substantially, and neither says anything about what volatility will do next.