Volatility term structure
How implied volatility varies across expirations for the same underlying. Upward-sloping (longer-dated IV higher) is the calm-market norm; inversion, with short-dated IV highest, marks stress.
The term structure is the volatility market’s yield curve. Its usual upward slope reflects both mean-reversion (near-term calm is expected to persist) and a risk premium in longer-dated insurance.
Traders watch the front of the curve most: when 1-month IV jumps above 3-month, the market is paying up for immediate protection — historically a regime worth respecting rather than fading automatically.
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