Volatility is a measure of how large an asset's prices swing around the mean price within a given timeframe.
In options, volatility is used to calculate premium fee pricing for call/put option contracts based on their strike price and expiration.
For liquidity pooling on AMMs such as Uniswap, volatility could help us estimate risk of possible impermanent loss as .
By combining liquidity pooling on Uniswap with an option straddle (buying a call+put option with the same strike price) we are purchasing insurance against possible impermanent loss. Volatility could estimate if pooling fees earned will be greater than option premiums paid.