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+822 Part VI: Measuring and Trading Volatility 
+Consider the historical volatilities of one of the wilder stocks of the tech stock 
+boom, Rambus (RMBS). Historical volatilities had ranged between 50% and ll0%, 
+from the listing of RMBS stock, through February 2000. At that time, the stock aver­
+aged a price of about $20 per share. 
+Things changed mightily when RMBS stock began to rise at a tremendous rate 
+in February 2000. At that time, the stock blasted to ll5, pulled back to 35, made a 
+new high near 135, and then collapsed to a price near 20. Hence, the stock itself had 
+completed a wild round-trip over the two-year period. See Figures 39-2 and 39-3 for 
+the stock chart and the historical volatility chart of RMBS over the time period in 
+question. 
+As this happened, historical volatility skyrocketed. After February 2000, and 
+well into 2001, historical volatility was well above 120%. Thus it is clear that the 
+behavior patterns of Rambus changed greatly after February 2000. However, if one 
+had been comparing historical volatilities at any time after that, he would have erro­
+neously concluded that RMBS was about to slow down, that the historic volatilities 
+were too high in comparison with where they'd been in the past. If this had led one 
+to sell volatility on RMBS, it could have been a very expensive mistake. 
+While RMBS may be an extreme example, it is certainly not alone. Many other 
+stocks experienced similar changes in behavior. In this author's opinion, such behav­
+ior debunks the usefulness of comparing historical volatility with past measures of 
+historical volatility as a valid way of selecting volatility trades. 
+FIGURE 39-2. 
+Historical volatilities of RMBS. 
+RMBS 19.000 17.250 18.875 20010410 
+............ ······· 60.0 
+· ·················· 50.0 
+...... ······· 40. 0 
+39 M i·h··-:; s ·~ s a ~--f:i--·5--r;;····~··h s·s- A s a N □ s--r·;; r