Term Structure

What It Shows

Term Structure shows how at-the-money implied volatility compares across all live expirations simultaneously. Instead of looking at one expiration at a time, you see the full curve from the nearest expiry out to the furthest available — giving you a picture of how the market is pricing volatility over time.

Reading the Chart

Each column in the Term Structure view represents one expiration. The value shown is the ATM implied volatility for that expiry. Compare columns to see:

• Contango — Vol rises as you go further out in time. The most common state in calm markets; the market expects more uncertainty over longer horizons.
• Backwardation — Near-term vol is higher than longer-dated vol. Occurs during stress events or when the market is pricing an imminent catalyst.
• Flat structure — Vol is roughly equal across tenors, often seen when the market is uncertain about timing but not magnitude.

Inversion Signals

A term structure inversion — where a near-term expiration is pricing significantly higher vol than longer-dated expirations — is one of the clearest signals of short-term stress or an event-driven catalyst (earnings, FOMC, macro data). The magnitude of the inversion reflects how concentrated the market's fear (or demand for protection) is in the near term.

Using Term Structure with Other Views

Term structure is most useful when combined with the Tilt and FDV views:

• If near-term vol is inverted and tilt is elevated, the market is pricing both high vol and directional skew into the short-dated expiry — a strong signal of demand for near-term downside protection.
• If term structure is flat but tilt is skewed, the market sees a directional but not necessarily volatile environment.