Plotting options implied volatility surfaces with Matplotlib
Traders use Matplotlib to visualize complex data, such as options implied volatility surfaces. These visuals help understand how implied volatility of options changes with different expiration dates and strike prices. Implied volatility surfaces are important for traders for information on the market’s expectations of future volatility.
These surfaces show two main features: skew and term structure. Skew refers to how implied volatility varies at different strike prices for the same expiration date. It can indicate the market’s expectation of significant price shifts. Term structure shows how implied volatility changes for options with the same strike price but different expiration dates. Term structure shows how volatility is expected to evolve over time.
Although a detailed explanation of skew and term structure is beyond the scope of this book, it’s important to note these aspects of the volatility...
