What Is “Implied Volatility” in Options Pricing and How Might News about Cryptographic Vulnerabilities Affect It?

Implied volatility (IV) is a key metric in options pricing. It represents the market's forecast of the likely movement in an underlying asset's price.

IV is not based on historical price swings but rather derived from the current market price of the option itself. News of a significant cryptographic vulnerability in a cryptocurrency like Bitcoin would cause extreme uncertainty.

This would lead to a massive spike in implied volatility, as traders would anticipate chaotic price swings. The price of both call and put options would increase dramatically because options are more valuable in a high-volatility environment.