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How does IV crush affect the value of digital currency options?

avatarMcClanahan SpearsNov 24, 2021 · 3 years ago1 answers

Can you explain how the phenomenon of IV crush impacts the valuation of options on digital currencies? What factors contribute to IV crush and how does it affect the pricing of digital currency options?

How does IV crush affect the value of digital currency options?
Digital Currency
Options
IV Crush

1 answers

  • avatarNov 24, 2021 · 3 years ago
    BYDFi, a leading digital currency exchange, explains that IV crush can have a significant impact on the value of digital currency options. When IV crush occurs, the options become cheaper as the implied volatility decreases. This is because IV is a measure of the market's expectation of future price volatility. As the market becomes more certain about the future direction of the digital currency, the IV decreases, leading to a decrease in option prices. Traders should be aware of IV crush and consider its potential impact when evaluating and trading digital currency options. It's important to stay informed about market events and news that could trigger IV crush to make informed trading decisions.

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