Understanding Volatility

Volatility measures the dispersion of returns over time. Higher volatility means wider possible outcomes in both directions. It is a property of the asset, not a verdict on it.

Realized volatility is what already happened — measurable from price history. Implied volatility is what options markets expect going forward. The gap between them often signals positioning extremes.

Risk is the chance of permanent loss. Volatility is short-term fluctuation. A volatile asset you hold for a decade can be low-risk; a stable asset that quietly goes to zero is high-risk. Don't confuse the two.

Position size so that a typical drawdown is uncomfortable but survivable. Avoid leverage you cannot meet from cash. Volatility only ruins investors who are forced to sell at the wrong time — usually because they sized too big.