The term structure of expected movement

Implied volatility is not one number per underlying but one per expiry - so it has a term structure across dates, exactly as the futures curve ran across delivery months. Reading it says when the market expects the underlying to move.

The shape and its reads

• The usual upward slope: longer-dated options usually carry higher implied volatility, because more can happen over more time - the normal term structure, analogous to the futures contango the reader already knows.
• The event bump: a specific expiry can carry elevated implied volatility because a known event - earnings, a decision - falls before it; the bump marks the dated event the market is pricing, isolatable by comparing expiries.
• The inversion: when a large near-term event looms, near-dated implied volatility can exceed far-dated - the structure inverting because the immediate uncertainty outweighs the longer horizon, the volatility equivalent of futures backwardation.

What the term structure reads

The shape across expiries is a map of expected movement over time. A bump at the expiry after an earnings date isolates the earnings-move expectation; an inverted structure says the market expects near-term turbulence resolving into calm; a steep normal slope says the uncertainty grows with horizon. Comparing an option's implied volatility to its neighbours across expiries - not just to history - says whether it is expensive because of a specific dated event or because of the general term structure, which matters for whether the premium reflects a crush-prone event or a durable expectation.

The literacy this completes

The futures track read curves across delivery months; the options reader reads volatility across expiries - the same term-structure literacy, in the volatility dimension unique to options. It completes the reading of implied volatility: not one number, but a structure across time whose shape prices when movement is expected. Module 8 adds the other axis - the volatility smile and skew across strikes - to build the full surface; this module reads the expiry axis, because a term structure is where the reader first sees that volatility, like a futures curve, has a shape that carries information. Reading it is reading when the options market expects the underlying to move.