Time is your friend. Time smooths out volatility.

Historically, time smooths out volatility.

The longer you stay in the market, the more likely you are to see your investment do what it should.

The range of returns narrows when we hold our investments for a longer period of time.

Even the most volatile asset class, that is, stocks, becomes relatively stable when you take the long view.

If you have a reasonable time horizon, you have an excellent chance of high average returns over many years.
That translates into a comfortable portfolio with plenty of cushioning along the way.

What if you are approaching retirement or you are already in retirement?

How can you get the returns you want while minimizing the volatility you don't want?

The answer:  diversify.

Warrants: Historical Volatility

Historical volatility reflects the historical price of a stock within a given period of time.

If Stock A is trading at $10 with a volatility of 10%, then based on the theories of statistics, there is

-  68% of the time that the stock will be trading within the range of $9 to $11 ($10 +/- 1 S.D.),
-  95% of the time within the range of $8 to $12  ($10 +/- 2 S.D.)and
-  99.7% of the time within the range of $7 to $13  ($10 +/- 3 S.D.).

In other words, the higher the historical volatility of the underlying, the higher the level of its future volatility will be in a given period of time.


For the investors
Investors can use historical volatility to predict the future volatility and price direction in order to formulate their investment strategies.

For the issuer
For the issuer, historical volatility is one of the factors they need to take into account in determining the price of a warrant.
Where the historical volatility of its underlying is high, a warrant is likely to be issued at a higher price. However, past performance may not indicate future trends.
Hence, in the pricing process, an issuer will alos find out what the markte expects of the future volatility of the underlying, that is what we call the "implied volatility" of the warrant.