Future Volatility

Future volatility is how much a price is expected to swing between now and some point ahead in time, expressed as a single number, even though nobody actually knows what that swing will be yet. It is a forecast, not a fact. Volatility itself just means the size of price moves — a stock that jumps 5% a day is more volatile than one that drifts 0.5% a day — and "future" volatility is that same idea projected forward instead of measured from what already happened.

Because the future hasn't occurred, this number has to come from somewhere other than a simple calculation on past prices. Traders and pricing models often use implied volatility, a figure backed out of current option prices, as their best estimate of future volatility — the logic being that option prices reflect what the market collectively thinks is coming. Others build statistical models (various forms of GARCH-type models, for example) that try to project forward from patterns in past volatility. Either way, the result is an estimate with a margin of error, not a measurement.

The nuance that trips people up: future volatility is easily confused with historical (or "realized") volatility, which is a backward-looking calculation of how much price actually moved over some past window. Historical volatility is a fact you can compute exactly from data. Future volatility is a guess about what's coming, and it's routinely wrong — sometimes wildly so, especially around earnings, economic data releases, or other known catalysts where the market's guess and the actual outcome diverge sharply.

It's also worth keeping in mind that future volatility is usually quoted as an annualized percentage (a way of expressing how big the swings are if you scaled a shorter period up to a full year), which makes it comparable across different stocks and time frames but can make the raw number feel abstract or disconnected from actual day-to-day price action.