Ahead of a known catalyst — an FOMC decision, a CPI print, a big earnings report — implied volatility ramps up and the expected move widens. The market is pricing in the potential for a big reaction, and understanding this IV ramp is key to trading options around events.
Why IV rises into events
Implied volatility reflects the market's expectation of future movement. A known catalyst carries real potential for a large move, so demand for options (to hedge or speculate on the event) rises, bidding up their prices — which is a rise in implied volatility. The closer the event and the bigger its potential impact, the more IV ramps. This isn't the market predicting direction; it's pricing the magnitude of uncertainty the event represents.
What the ramp tells you
The widened expected move quantifies how big a reaction the market is braced for — a useful read on event risk. It also means options are expensive going into the catalyst: you're paying up for that priced-in uncertainty, so a long option needs a move bigger than the expected move just to overcome the inflated premium and the crush that follows. The straddle price is a direct read of the expected move the ramp has built in.
IV doesn't ramp because the market knows what's coming — it ramps because it doesn't. You're buying priced-in uncertainty, and you pay full retail for it right before the event.
Trading around it
The key implication: buying options right before an event means buying expensive, IV-inflated premium that will crush after the catalyst — a poor trade unless the move is large enough to overcome both. For a 0DTE scalper, respect that pre-event premium is rich and the post-event crush is real. NoVo accounts for the volatility environment in its execution; understanding the IV ramp tells you why options are pricey into a catalyst and why the timing of an options trade around events matters so much.