Implied Volatility and Volatility Trading

Call Skew

Call skew describes a volatility structure in which upside call options trade at relatively elevated implied volatility compared with other strikes.

Earnings IV

Earnings IV refers to the elevated or event specific implied volatility associated with option contracts that capture a company's earnings announce...

Event Premium

Event premium refers to additional option value associated with uncertainty surrounding a specific event expected to occur before expiration.

High Implied Volatility

High implied volatility means option prices are reflecting relatively high expected volatility, either in absolute terms or relative to an appropri...

Implied Move

Implied move is another term used for the magnitude of price movement inferred from option prices over a specified period.

Implied Volatility Is Not Direction

Implied volatility measures the volatility embedded in option prices. It does not, by itself, specify whether the underlying asset is expected to r...

Implied Volatility Premium

Implied volatility premium refers to implied volatility being elevated relative to an appropriate realized volatility expectation or reference.

IV Contraction

IV contraction occurs when implied volatility falls.

IV Crush

IV crush is a sharp decline in implied volatility, commonly associated with the removal of uncertainty after a significant scheduled event.

IV Expansion

IV expansion occurs when implied volatility rises.

Long Vega

Long Vega describes positive exposure to increases in implied volatility.

Long Volatility

Long volatility describes a position or strategy that generally benefits from greater volatility or sufficiently large market movement, depending o...

Low Implied Volatility

Low implied volatility means option prices are reflecting relatively low expected volatility compared with an appropriate reference or historical c...

Put Skew

Put skew describes a volatility structure in which lower strike puts trade at higher implied volatility than comparable higher strike options.

Short Vega

Short Vega describes negative exposure to changes in implied volatility.

Short Volatility

Short volatility describes a position or strategy that generally benefits when volatility or realized movement is lower than the position has effec...

Volatility Curve

A volatility curve is a visual representation of implied volatility across strikes, expirations or another relevant dimension.

Volatility Skew

Volatility skew describes differences in implied volatility across option strikes for the same underlying and expiration.

Volatility Smile

A volatility smile is a pattern where implied volatility is higher for options further away from the current underlying price on both sides than fo...

Volatility Smirk

A volatility smirk is an asymmetric implied volatility pattern across strikes rather than the more symmetrical shape suggested by a volatility smile.

Volatility Surface

A volatility surface is a three dimensional representation of implied volatility across both strike prices and expiration dates.

Volatility Term Structure

Volatility term structure describes how implied volatility differs across option expirations for the same underlying asset.

Volatility Trading

Volatility trading is an approach that focuses on changes in, or differences between, expected and realized volatility rather than relying only on...