IV, skew, and the expected move

Implied volatility is the yearly percentage move that makes an option model price match the market price. It is quoted in annual terms so contracts of different lengths can be compared. A quiet week and a nervous week show up as a low and a high IV.

IV is not the same at every strike. Plot it against strike for one expiry and you get a curve. When the low strikes, the puts, carry a higher IV than the high strikes, traders are paying more for protection against a fall than for a rise. That tilt is the skew. A smile that rises on both sides means both tails are expensive.

The Volatility view draws calls and puts as separate lines at each strike. They should sit close together; a wide gap usually means thin quotes, not information.

The at-the-money IV, the IV at the strike nearest the forward price, turns into a range for one expiry. One standard deviation of the price is:

price × IV × √(days to expiry ÷ 365)

That is the expected move. It is a market-implied range, not a forecast: about two times in three, the price is priced to finish inside it. The Max Pain view shows it as a band, with the put and call walls placed against it, so you can see whether the levels everyone talks about are inside or outside what the options market expects.

Realized volatility is how much the coin actually moved over a recent window. When implied sits well above realized, options are pricing more movement than recent days delivered; the reverse says options are cheap relative to what has been happening. The Contract view draws both.