How Does Implied Volatility Affect the Pricing of Crypto Options?

Implied volatility (IV) is a crucial factor in the pricing of crypto options, representing the market's expectation of future price fluctuations. Higher implied volatility leads to higher option premiums for both calls and puts, as it indicates a greater probability that the option will end up in-the-money.

Conversely, lower IV results in cheaper premiums. Traders often analyze IV to gauge market sentiment and identify potentially overpriced or underpriced options, making it a key metric for strategic decision-making in the volatile crypto market.