Volatility cones sometimes called probability cones

Guys,

Does anyone know how to model volatility cones? I’m struggling with this. Can someone help me or point me in the right direction?

Thank you!

As I mentioned in another post, if this “methodology” uses standard deviations, it’s purely descriptive of the sample at hand and can’t offer much “predictive” utility. There would be a different approach depending on whether you want to describe the data set at hand or have some statistical reliability to the chart.

those curves behave like sqrt(T) (square root of T) where T is the time in whatever units you are using.
If X0 is the initial price, the 4 curves are

X0+ sigma sqrt(T)
X0- sigma sqrt(T)
X0+ 2 sigma sqrt(T)
X0- 2 sigma sqrt(T)

where sigma is the one day volatility (standard deviation) and T is the time in days

Yes, sir! I figure it out just playing with it. But you are correct!

Thank you kindly and happy holidays!

1 Like