How Does a Change in the Time to Expiration Affect the Implied Volatility?

As the time to expiration decreases, the implied volatility of the option typically increases, especially for at-the-money options. This phenomenon, known as the "term structure of volatility," reflects the idea that near-term uncertainty is often higher than long-term uncertainty.

However, in periods of high market stress, the near-term implied volatility can spike dramatically.