Glossary · Defined term
Volatility
Volatility is the degree to which a security's price moves up and down over time, often measured by standard deviation.
Last updated Oct 2, 2026
What it means
Volatility is the degree to which a security's price moves up and down over time, most often measured by the standard deviation of its returns. High volatility means wide, rapid price swings and greater uncertainty about near-term outcomes; low volatility means steadier, narrower moves. Volatility is directionless: it describes the size of moves, not whether they are up or down. Options traders watch it closely because bigger expected swings make options more valuable, and the VIX index distills expected volatility for the S&P 500 into a single number. Investors generally demand higher expected returns for holding more volatile assets.
An example
For illustration, two stocks both end the year up 10 percent, but one got there in a straight line while the other swung 30 percent up and down along the way. The second stock was far more volatile, and an investor who needed to sell mid-year could have faced a steep temporary loss. Same destination, very different ride.