Definition

The "Term Structure" endpoints display the at-the-money (ATM) implied volatility for both active maturities (floating) and constant maturities. In addition to the ATM term structure implied volatility, these endpoints also include the forward volatility calculation.

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Details

Floating Term Structure:

• Displays the ATM implied volatility for active option maturities, i.e., the actual expiration dates of the options.
• This reflects the current market's view of volatility across different time horizons.
• Floating term structure allows for analysis of the shape and slope of the volatility curve based on market conditions.

The calculation for forward volatility, or the differential IV between any two expiration cycles, is as follows:

Forward IV = √[ (θ²T - σ²t) / (T -t)]

θ² = Longer-dated option variance

σ² = Shorter dated option variance

T = time until expiration of the longer-dated option

t = time until expiration of the shorter-dated option

Using forward IV, a trader can gauge the most expensive portion of the term structure.

Constant Maturity Term Structure:

• Displays the ATM implied volatility for constant time-to-expiration (DTE) values, such as 30 days, 60 days, 90 days, etc.
• This allows for a more standardized comparison of volatility across different time periods, as the maturities are fixed.
• Constant maturity term structure can be useful for analyzing the overall term structure and identifying potential mispricing opportunities.

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Availability

/Term Structure Constant

/Term Structure Floating

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