---
title: Volatility Change Filter
description: "  [![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Buy.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Buy.png) [![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Sell.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Sell.png)   This filter calculates the *change* of the instrument's volatility, whether the volatility is increasing or decreasing during the past certain period. For example, if a Position's volatility *increased* more than 30% (for the past 3 months),…"
url: "https://portfolioboss.com/documentation/volatility-change-position-filter/"
updated: "2022-08-27"
category: "Chapter 7 - Filters & Rules"
---

# Volatility Change Filter

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Buy.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Buy.png)

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Sell.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Sell.png)

 

This filter calculates the *change* of the instrument's volatility, whether the volatility is increasing or decreasing during the past certain period.

For example, if a Position's volatility *increased* more than 30% (for the past 3 months), then the strategy will exit out of that Position as it's becoming much riskier. In other words, the Position is more likely to maintain the *implied* higher volatility than you can tolerate.

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Overview_00000.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Overview_00000.png)

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Implied-Volatility_00000.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Implied-Volatility_00000.png)

Or the reverse (as a Buy Filter): if an instrument's volatility *decreases* more than 20% (for the whole past month), then the instrument is likely to maintain the implied lower volatility, thus a more stable trading when you enter its Position.

If an instrument's volatility doesn't change much during the specified period (either *flat high* volatility or *flat low* volatility), then its volatility *percentage change* will be near 0%.

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Constant-High-Volatility_00000.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Constant-High-Volatility_00000.png)

 

---

 

**1.**  The first parameter defines how many days or months to look for the *volatility change*. The longer the period, the more accurate the signal is; that is, the implied volatility is correct.

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-1st-Param.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-1st-Param.png)

 

---

**2.**  The second parameter defines whether the volatility must "Increase more than" or "Decrease more than" the specified *percentage change*. "Increase more than" implies a more volatile instrument, whereas "Decrease more than" implies a more stable instrument. 

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-2nd-Param.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-2nd-Param.png)

 

Do understand that you don't want a perfectly stable instrument as you'll gain nothing (even though you lose nothing as well), as riskier instruments also carry with them a potentially higher return (despite potentially higher losses).

 

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**3.**  The third parameter defines the threshold *percentage change* in volatility. Generally, a value of 20% is useful for generating correct signals.

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-3rd-Param.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-3rd-Param.png)

 

---

 

#### Note:

 

Once you applied this filter, two indicators appear *below* the [Price Chart](https://portfolioboss.com/documentation/instrument-tab/). One indicator is for the instrument's volatility, while the other is for the *percentage change* of that volatility during the specified period.

 

[![](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Indicator.png)](https://portfolioboss.com/wp-content/uploads/2019/10/Volatility-Change-Position-Filter-Indicator.png)

 

Keep in mind, the *percentage change *may go in the negative values; that means a *decrease *in volatility (an *overall decrease *from the start of the period to the end). Remember that each point in the indicator is the reading from that point to the start of the specified period (e.g 3 months).

 

 

 

 

 

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