Market Measures - June 29, 2021 - IV Across Expirations

published 3 weeks ago by tastytrade, Inc.

The definition of IV in a specific expiration cycle can best be described as “the size of the expected price volatility over that timespan.” A higher IV for a given expiration cycle means the overall price volatility in that expiration cycle is expected to be greater than cycles with lower IVs. Economically, this must hold because higher IVs mean option prices are higher, which means there is more demand for premium (more fear) in that cycle.

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