In Derivatives, How Does the Underlying asset'S Supply Dynamics Affect the Option's Implied Volatility? ⎊ Path

In Derivatives, How Does the Underlying Asset’s Supply Dynamics Affect the Option’s Implied Volatility?

The underlying asset's supply dynamics, such as a major token unlock or a scheduled token burn, can significantly influence market expectations about future price movements. These events increase uncertainty, which is often reflected as a rise in the option's implied volatility (IV).

High IV leads to higher option premiums, as the market anticipates larger price swings.

How Does the “Moneyness” of an Option Affect Its Premium Value?

How Can a Protocol Use Deflationary Mechanisms (Like Token Burns) to Counteract Inflation?

How Do “Token Unlocks” Create Selling Pressure on a Crypto Asset?

Explain the Process of ‘Minting’ and ‘Redeeming’ a Wrapped Token

Are the Insurance Premiums for Crypto Custody Significantly Higher than for Traditional Assets?

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

What Is the Difference between ‘Circulating Supply’ and ‘Total Supply’?

What Is the Relationship between Interest Rates and Option Premium?

Glossar

Supply Dynamics

Allocation ⎊ Supply dynamics within cryptocurrency, options, and derivatives fundamentally concern the distribution of assets and the resultant price discovery mechanisms.

In Derivatives, How Does the Underlying asset’S Supply Dynamics Affect the Option’s Implied Volatility?