What is a volatility cone?

A volatility cone displays historical percentile bands (10th, 25th, 50th, 75th, 90th) of realized volatility across multiple lookback windows, with the current RV value overlaid. It lets you see at a glance whether current volatility is historically high or low across 7d, 14d, 30d, 60d, 90d, and 180d windows simultaneously.

How do I read a volatility cone?

Locate the current RV dot for each lookback window relative to the percentile bands. Dots near the 10th percentile mean volatility is historically low for that window; near the 90th means historically high. Comparing short and long windows reveals regime: short-high + long-median = recent spike; short-low + long-median = compression setup.

Why use multiple lookback windows?

A single RV number can be misleading. 30-day RV at the 50th percentile might still be an anomaly if 7-day RV is at the 90th and 180-day is at the 30th — the recent spike is not yet in the 30d window. Multi-window cones expose regime transitions that single-window RV misses.

How is realized volatility calculated?

RV = annualized standard deviation of log returns over the lookback window. Sharpe uses daily log returns: RV_window = std(log_returns) × sqrt(365) × 100. Same methodology as professional vol desks and Deribit's published RV metrics.

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