Volatility is one word for two very different numbers, and confusing them costs traders money.
Realized volatility is backward looking. It measures how much price actually moved over a past window. It is a fact, calculated from the tape.
Implied volatility is forward looking. It is the volatility the options market is pricing in for the future. It is an expectation, baked into option premiums.
The gap between them is where the signal lives.
When implied sits above realized
If implied volatility is well above realized, the options market expects bigger moves than the asset has recently delivered. Option sellers are paid a premium for that expectation. Sometimes the fear is justified, ahead of a known event. Sometimes it is just expensive insurance.
When realized sits above implied
If realized volatility is running above implied, the market has been moving more than options priced in. Option buyers got a bargain and sellers got run over. This often happens when a quiet regime breaks and the options market is slow to catch up.
Why it matters for positioning
Reading the two together tells you whether protection is cheap or expensive, and whether the market is complacent or braced. A market with low implied volatility and rising realized volatility is often a market that is underpricing risk.
The same logic applies across the curve and across venues. A single source can lag. Reading volatility, funding, open interest, and liquidity together gives a fuller picture than any one metric alone.
Athenum brings these layers into one workspace across 14 exchanges, so you can read expectation against reality without switching tools. See it at Athenum.