What is the Rule of 16? To estimate the markets expectation of 1-day volatility, divide an option’s implied volatility by 16. 16 is used as there are generally 252 trading days in a year, and the square root of 252 is approximately 16 (15.87). Interested in learning more? Related articles What is Short Selling? What is Tail Risk? What is Short Skew? What is a Linear Stock Payoff? What is Long Skew?