So if I am calculating the historical volatility by using daily prices with a sample of 40 observations or so. Once I take the variance of ln(Si/Si-1) for each sample, I need to divide by 365 and take the square root right? Can I then use this value in the black scholes equation for option expiring in one month (T=1/12) and r=.07 (annual rate) ? What I am concerned about is , that the black scholes volatility needs to be in the same terms or time period as the t and r correct?
Annualized Volatility
