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Using ATM Implied Volatility Box Plots to Compare Volatility Levels

Article Amberdata research
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Summary

This feature note describes box plots for at-the-money implied volatility across constant-maturity points on an options term structure. It identifies the 25th, 50th, and 75th percentiles, along with lower and upper fences calculated as the first quartile minus 1.5 times the interquartile range and the third quartile plus 1.5 times that range. A dotted marker shows the latest observation against the historical distribution.

The intended use is to judge whether current implied volatility appears relatively cheap or rich compared with its historical values. The note references comparisons for year-to-date and prior calendar years, but provides no chart values, trading rules, or evidence that such relative valuation predicts subsequent returns. Results depend on the historical sample, maturity construction, and chosen comparison period; the note does not discuss these choices in detail. It is a descriptive options-volatility visualization rather than a tested trading strategy.

Key ideas

  • The chart summarizes ATM implied volatility distributions at constant maturities.
  • It displays quartiles and uses 1.5-IQR fences to flag observations beyond the central distribution.
  • A dotted line marks the latest value for comparison with historical observations.
  • The visualization can frame relative volatility as cheap or rich, but the note supplies no predictive test or trade rules.

Tags

OptionsVolatilityDerivatives pricingStatistics

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.