What Is the Volatility Smile in Crypto Options and How Does Network Maturity Affect It?
The Volatility Smile is a pattern where out-of-the-money (OTM) and in-the-money (ITM) options have higher implied volatility (IV) than at-the-money (ATM) options. This shape suggests the market expects large, unexpected price moves.
As a blockchain network matures and price discovery stabilizes, the smile often flattens or becomes less pronounced, indicating a more normalized risk profile.
Glossar
Volatility Smile
Shape ⎊ This refers to the graphical representation of implied volatility plotted against the option's strike price, which deviates from the flat line predicted by basic models.
Implied Volatility
Expectation ⎊ This value represents the market's consensus forecast of future asset price fluctuation, derived by reversing option pricing models using current market premiums.
Volatility Smile in Crypto
Derivation ⎊ The volatility smile in crypto represents a graphical depiction of implied volatility across various strike prices for options contracts on a given cryptocurrency asset.
The Volatility Smile
Phenomenon ⎊ The volatility smile is an empirical market phenomenon where implied volatility, derived from options prices, systematically differs across various strike prices for options with the same expiration date.
Network Maturity
Decentralization ⎊ Network maturity describes the progression of a blockchain project from a centralized development phase to a decentralized, community-governed state.