How Does Implied Volatility Affect the Premium of a Long-Dated Crypto Option Hedge?

Implied volatility (IV) is a major component of an option's premium. For long-dated options, the cumulative effect of IV over a longer time horizon significantly inflates the premium.

Higher IV means the market expects larger price swings in the future, thus increasing the cost of protection. A long-dated hedge bought when IV is high is more expensive, which can reduce the hedge's cost-effectiveness.

The VIX of crypto, often high, makes long-dated hedges costly.