Investment Jargon: Rule of 16

Rule of 16

To convert a daily volatility to an annualized volatility you multiply by the square root of the number of trading days in a year, which is 252. This is approximately 16, so a useful trader’s trick is to annualize daily vol to annual vol by multiplying by 16. For example, if the daily volatility is 2% the annualized volatility will be roughly 32% (very close to the annualized volatility, which is 31.7%).