Introducing Implied Volatility Surface Metrics

Talos is pleased to announce the release of a comprehensive set of implied volatility metrics that significantly expands our Coin Metrics Market Data Pro derivatives offering.

In raw option markets, liquidity is fragmented across hundreds of discrete contracts, each with a unique strike price and expiration date. As time passes and market prices move, these discrete points shift, making it difficult to construct a consistent historical timeseries.

To solve this, we introduce new metrics that standardize the volatility surface into continuous and consistent timeseries.

These metrics allow for backtesting, assessing market sentiment, and risk modeling without needing to identify specific options, interpolate values, and roll options as contracts expire. Our metrics can be used to for several use cases, such as:

• Examining the implied volatility smile: Compare how the market prices out-of-the-money (OTM) options versus at-the-money (ATM) options. For instance, users can assess tail risk by comparing 25-delta vs. 50-delta metrics.
  
• Analyzing the term structure: Compare short-term volatility (gamma risk) against long-term volatility (vega risk) using constant tenors. For instance, users can assess the difference in market expectations between 7-day vs. 180-day IV.
  
• Measuring market sentiment: Compare call and put implied volatilities to determine the directional bias of the market. For instance, users can compare the skew between a 25-delta call vs. 25-delta put.
  
• Evaluating the volatility premium: Compare the market’s forward-looking expectations (implied volatility) against the asset’s actual past movements (realized volatility). For instance, users can identify whether options are overpriced or underpriced by analyzing the spread between 30-day ATM IV and 30-day realized volatility.

New metrics

We are introducing four new metric sets:

1. Implied Volatility, Constant Maturity, At-The-Money
   A set of 13 metrics that represent the annualized estimated implied volatility of an option expiring at specified tenor in the future, using at the money option contracts with near-by expiration dates. We offer several tenors between one-day to one-year.
   

2. Implied Volatility, Constant Maturity, Constant Delta
   A set of 260 metrics that represent annualized interpolated implied volatility of a call or put option with a constant delta and expiring at a constant tenor in the future. We offer various deltas from 5 to 50 and various tenors from one-day to one-year. These 260 metrics represent evenly-spaced points along the volatility surface.
   
3. Skew, Constant Maturity, Constant Delta
   A set of 130 metrics representing the option skew derived from a call and put option with a constant delta and expiring at a constant tenor. We similarly offer various deltas and various tenors at evenly-spaced points.
   
4. Realized Volatility
   A set of 9 metrics representing the historical, realized volatility for all major assets. We offer several rolling periods between one-day to one-year.

Additional derivatives data and metrics

The four new sets of metrics we released are derived directly from the massive, granular datasets and other metrics already available in our Market Data Feed and Market Data Pro offerings. 

This release enhances our ability to provide a complete picture of the crypto derivatives market, which currently includes:

• Expansive coverage: Full coverage of all listed instruments on 24 futures exchanges and 7 option exchanges, consisting of all major cryptocurrency venues engaging in derivatives trading today.

• Granular data types: All major data types for individual derivatives contracts are supported, including contract specifications, trades, quotes, order book, candles, funding rates, predicted funding rates, liquidations, open interest, mark prices, index prices, implied volatility, and greeks.
  
• Analytics: In addition to raw data, we provide pre-calculated metrics to streamline common analytical queries, including annualized basis, volume aggregations, global funding rates, global liquidations, and global open interest.

Get started 

These new metrics give users a clean, standardized view of crypto options markets. Delivered through our Coin Metrics Market Data offering, these metrics let you quickly analyze volatility, sentiment and relative value across maturities and deltas. Contact us to learn more or request access.