Hi. I had a question. Many people take 252 trading days for the purpose of standard deviation (IV), while some consider 365 days. So, what should we actually consider because the results will change drastically?
Thanks in Advance. @NithinKamath
There is nothing specific to one number,one can use any number of days based on what they are looking for. Coming to your query, 252/365, normally when people try to calculate yearly volatility they consider 252 trading days or 365 calendar days, both are same, so if you want yearly volatility you can use 252 as generally a year will have 252 trading days, plus or minus few.
IV is not standard deviation. (for your reference) 252 days is used as the average number of trading days in a year removing weekends and possible holidays. i.e. days no trades occur on.
My question was that many of them take 365 as the number. What should we do in such case for our calculation?
Its up to you, but your results will vary. It shows the movement of a stock over trading days, so ideally you should use the number of trading days.