Expiry Term Structure

Volatility

The expiry term structure, within cryptocurrency options, represents the implied volatility levels across a range of strike prices for options expiring on the same date. This structure is not typically flat, reflecting market expectations regarding the probability distribution of the underlying asset’s price at expiry, and often exhibits a ‘smile’ or ‘skew’ pattern. Analyzing this structure provides insight into demand for out-of-the-money puts and calls, revealing potential hedging activity or directional biases among market participants. Consequently, traders utilize this information to refine pricing models and identify arbitrage opportunities within the derivatives market.