Calendar vs trading days
Definition · Level 5 · Greeks & volatility
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The square-root-of-time formula uses calendar days ÷ 365 (some desks use trading days), while the rule of 16 uses 252 trading days. Mixing them on a one-day move gives about a 20% error.
Example
One day: √(1 ÷ 365) is 5.2% of annual vol; √(1 ÷ 252) is 6.3%.
Rules and market figures change: check the current ones before relying on this.
Where Tradecraft teaches it
Level 5 · Greeks & volatility, in the lesson “The expected move and the rule of 16”: Turn annual volatility into a move in dollars over any horizon, from a year down to a day.
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