How Does Implied Volatility in Options Contracts Affect the Potential for Price Slippage on Large Orders?

High implied volatility (IV) significantly increases the potential for price slippage. High IV means the market expects large price swings, which leads to wider bid-ask spreads and a less stable order book.

When placing a large options order in a high IV environment, the price can move quickly and unfavorably between the execution of different parts of the order. The initial tranches might fill at one price, but the rapidly changing market can cause later tranches to fill at much worse prices, resulting in significant slippage.