These represent the market’s consensus view on the magnitude of future price dispersion for a given cryptocurrency or derivative contract over a specific time horizon. Derived from econometric models and sentiment analysis, a strong forecast influences the setting of option premiums. Divergence between realized volatility and these expectations presents direct trading opportunities.
Implied
This is the market’s forward-looking measure of expected volatility, directly observable from the current prices of exchange-traded options across various strikes and maturities. Analyzing the shape of the implied volatility surface provides a real-time gauge of risk appetite and potential future price swings. Traders actively trade the spread between implied and realized measures.
Metric
The term is often operationalized through measures like the VIX equivalent for crypto assets or the skewness and kurtosis embedded in the implied volatility smile. These quantitative measures allow for the systematic comparison of expected risk across different underlying assets or time periods. A shift in this metric signals a fundamental change in perceived market uncertainty.
