Measuring Options Volatility Term-Structure Richness
Summary
This document introduces a measure called term-structure richness for describing the relative level of contango or backwardation in an options volatility curve. A value of 1.00 represents a flat curve under the provider’s measurement method; readings on either side indicate the curve’s shape, with lower values associated with contango and higher values with backwardation. The measure is intended to show how extended current term-structure pricing is at a given time.
The calculation uses relative spreads among at-the-money implied volatilities at seven-, 30-, 60-, 90-, and 180-day maturities. This offers a way to condense several maturity relationships into a single reading for monitoring the volatility curve. The text points readers to a historical chart for Deribit options but supplies no formula, sample values, empirical results, or trading rules. It also does not explain how the measure should be calibrated across assets or market regimes. It is best treated as a descriptive analytics feature, not a standalone signal with demonstrated predictive value.
Key ideas
- Term-structure richness summarizes the relative level of contango or backwardation in an options volatility curve.
- A reading of 1.00 denotes a flat curve according to the provider’s method.
- The measurement compares at-the-money implied volatilities across five stated maturities.
- The document describes an analytics measure but provides no formula, backtest, or trading interpretation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.