vol-term-structure

Vol Term Structure

Pull ATM IV across all listed expiries, identify contango vs backwardation, and flag event-driven jumps.

---

Step 1: Pull All Expiries

Use yfinance-options to list expiries; filter to expiries with at least 10 contracts and a market-mid spread under 30% for the ATM strike. Keep up to 12 expiries (1Y horizon is plenty for vol-term-structure work).

---

Step 2: Compute ATM IV per Expiry

For each expiry T:

• Forward F = S · e^((r−q)·T)
• ATM strike = strike closest to F. If the listed strike is > 1% from F, interpolate IV between the two bracketing strikes.
• Take the average of the ATM call IV and the ATM put IV. They should be very close (put-call parity in vol); a wide gap means stale quotes — flag it.

---

Step 3: Classify Shape

slope_short = IV(2nd expiry) − IV(1st expiry)
slope_long  = IV(last expiry) − IV(median expiry)

Shape	Pattern	Interpretation
Contango	Front-end IV < back-end IV (positive slope)	Quiet regime, vol-sellers' market
Backwardation	Front-end IV > back-end IV (negative slope)	Stress regime, vol-buyers' market
Humped	Local maximum at one expiry, then decline	Event vol — earnings, FDA, Fed
Bowl	Local minimum mid-curve	Rare; suggests pricing dislocation

Print the percentile of slope_short over the past year. Sustained backwardation often precedes selloffs (or follows them — context matters).

---

Step 4: Detect Event-Vol Jumps

If two adjacent expiries differ by > 3 vol points and there's a known scheduled event between them (earnings date, FOMC, ex-div), flag the event as the likely cause.

Check the earnings calendar:

!`python3 -c "import yfinance as yf; t = yf.Ticker('AAPL').calendar; print(t)" 2>/dev/null || echo "Calendar unavailable"`

The expiry after an earnings date typically has +5 to +15 vol points on single-name names. This vol crashes 30-60% the day after the print — the canonical "earnings vol crush" trade.

---

Step 5: Term-Structure Trade Patterns

Setup	Trade	Why
Steep contango, no event ahead	Calendar (sell near, buy far)	Front-month rolls down the curve
Backwardation extreme	Buy front-month vol	Curve mean-reverts to flat
Earnings bump	Sell front-of-earnings, buy back after	IV crush is reliable; magnitude isn't
Flat curve	No vol-curve trade — pick a different angle

Never sell pre-event vol without a sizing plan. A miss-and-gap can erase weeks of premium collection.

---

Step 6: Respond to User

1. The full term structure table (expiry, DTE, ATM IV, slope from previous).
2. Shape classification + percentile.
3. Any event-vol jumps flagged.
4. One trade idea if a clear pattern emerges.

For the cross-strike picture (skew at each expiry), recommend vol-skew or full iv-surface.