A two dimensional graph of implied volatility (y-axis) compared to time (x-axis). IV (Implied volatility) is the expected percentage range over the next year—based on option prices—with 68.3% confidence. One important dynamic of term structure is that it is not simply enough to compare different IV% amounts side by side for term structure edge. Rather, different IV% amounts must first undergo a calculation for forward IV. After this calculation, if one IV% is higher than the other, then there can be a term structure edge in buying the lower IV% and selling the higher IV%.