Volatility & advanced strategies
What is Forward Volatility and how do options professionals trade it using forward-starting contracts?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Forward Volatility refers to the implied volatility expected between two future dates, derived mathematically from the volatility term structure of options with different expirations rather than directly quoted in the market.
How it works
Professionals trade forward volatility views using calendar spreads, variance swaps, or combinations of options across expirations designed to isolate exposure to a specific future time window's volatility.
An example
If 30-day IV is 20% and 60-day IV is 24%, the implied forward volatility for the period between day 30 and day 60 can be calculated using variance-weighting formulas.
Risk & limitations
Forward volatility is a derived estimate from current prices, not a market-guaranteed outcome, and can shift significantly as actual market conditions and term structure evolve.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.