How Does a Sudden News Event Typically Affect the Implied Volatility of a Derivative? ⎊ Path

How Does a Sudden News Event Typically Affect the Implied Volatility of a Derivative?

A sudden, unexpected news event, such as a regulatory announcement or a major hack, typically causes a sharp and immediate increase in the implied volatility (IV) of the related derivative. This is because the event introduces significant uncertainty about the future price path.

Higher IV leads to higher option premiums and a widening of the bid-offer spread as market makers adjust for increased risk.

In an Option Spread Strategy (E.g. a Bull Call Spread), How Many Times Does the Bid-Offer Spread Cost Factor In?

How Is “Implied Volatility” Related to the Bid-Offer Spread in an Options Contract?

How Does the Volatility of the Underlying Asset Affect a Market Maker’s Desired Spread for an Option?

How Does an Asset’s “Quality” Influence Its Bid-Offer Spread?

How Does a Wider Bid-Ask Spread on an Altcoin Affect Option Pricing?

Why Do Newly Listed Cryptocurrencies or Stocks Typically Have a Wider Bid-Ask Spread?

How Does the Concept of “Event Risk” Affect Option Pricing?

Explain the Term ‘Volatility Crush’ and Its Impact on Option Premiums

Glossar

Unexpected News

Disruption ⎊ Unexpected news within cryptocurrency, options trading, and financial derivatives frequently manifests as systemic risk events, triggering rapid price discovery and challenging established valuation models.

Sudden News Event

Shock ⎊ A sudden news event, such as an unexpected regulatory announcement or a major protocol exploit, introduces an immediate, high-magnitude shock to the underlying cryptocurrency's spot price and, consequently, its derivatives market.