Implied Volatility

The market's forecast of future volatility, derived backwards from option prices. When IV is high, options are expensive; when low, cheap. Crypto IV (60-80% annualised for BTC) runs 3-5x equity IV (15-20% for SPY). The 'vol risk premium' — gap between IV and subsequently realised vol — is what option sellers earn over time. Reading the IV surface across strikes and expiries reveals market positioning.