How Does a Sudden Change in the Underlying Crypto Asset's Spot Price Impact the Option IV Surface and Quote Competitiveness? ▴ Learn

How Does a Sudden Change in the Underlying Crypto Asset’s Spot Price Impact the Option IV Surface and Quote Competitiveness?

A sudden spot price change can cause a shift in the IV surface, particularly affecting the 'moneyness' of existing strikes. The market maker must rapidly adjust their IV surface and quotes to reflect the new reality.

Failure to update quickly will lead to stale, uncompetitive quotes and a high risk of adverse selection, as counterparties exploit the mispriced options.

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