In Options Trading, What Is Implied Volatility and How Does It Relate to Cryptocurrency Options?

Implied volatility (IV) is a market's forecast of a likely magnitude of price fluctuation for an underlying asset, derived from the current price of an option contract. It is a key input in option pricing models; higher IV leads to higher option premiums, and vice versa.

For cryptocurrency options, IV is often significantly higher due to the extreme price swings and 24/7 trading nature of the underlying crypto assets. This higher IV makes crypto options generally more expensive.