What is an IV and HV chart in trading?

The volatility of the underlying stock expressed as the annualized standard deviation of changes in the stock price is HV. A stock with an HV of 15 is less volatile than one with an HV of 25. During one period, a stock's HV may be 40 while its HV during another time might be 20.

IV is based on a look ahead to the market's anticipated future price volatility of a stock. IV rises ahead of expected stock price fluctuations and falls after occurrences like earnings announcements due to the supply and demand element of options pricing.

What are some ways in which you could apply this?

If IV is greater than HV at the same time, the market anticipates that the stock will become more volatile than it has been. If IV is lower than HV, the market's expectations may be reduced. Stock traders might utilize this data to help them decide whether to place stop orders or entry triggers based on stock price volatility.

Options traders might search for low IV situations, yet HV is high, suggesting that options are underpriced versus the potential stock price change. Future price movement cannot be guaranteed by any single type of study, including volatility analysis.