The Volatility Term Structure
Implied vol also varies by expiry, forming contango, backwardation, and event humps that reveal where the market prices risk in time.
Just as implied volatility varies across strikes, it varies across expiries, and the resulting term structure encodes how uncertainty is distributed through time. Equity index volatility is usually in contango, with longer maturities priced above shorter ones, but short-dated vol spikes into backwardation around crashes and scheduled catalysts such as central-bank meetings, elections, and earnings, leaving an event-driven hump that decays once the date passes. Mean reversion in volatility explains why spikes are short-lived. Reading the term structure tells you where the market prices risk in time; combining it with the smile yields the full surface built in the next group.