For the complete documentation index, see llms.txt. This page is also available as Markdown.
Implied Volatility vs Realized Volatility
This metric shows the difference between Implied Volatility and Realized Volatility. Typically Realized Volatility lags behind Implied Volatility especially during rigorous market conditions.
Volatility traders care not only about what is expected (Implied Volatility) but also what actually transpired (Realized Volatility).
By knowing the difference between the two, a better view of the market (and option strategies) can be made.
BTC Implied Volatility vs Realized Volatility
Mean Reversion of Volatility
From historical data, IV tends to overstate actual realized volatility(RV). The reason being that the fear of uncertainty is overblown, which leads to a positive outcome – option selling can be profitable for traders.
Limitations
We could look at the current implied volatility (IV) and compare it to realized volatility (RV). This however can be quite misleading, because RV is by definition a lagging indicator since it looks into the past. Past price action is not a predictor of future price action.
