Spotting Vol Setups in the Volatility Scan

What the Volatility Scan Shows You

The Volatility Scan is your window into the implied volatility landscape. While the Price Levels shows you where structural forces sit, the Volatility Scan shows you what the market expects to happen — and how fear and complacency are distributed across strikes and expirations.

The tool presents three key views:

Skew — How IV varies across strikes for a given expiration. Shows you where the market is pricing the most risk (steep put skew = high fear of downside).

Term Structure — How IV varies across expirations at a given strike. Shows you whether near-term or far-term uncertainty is higher.

Vol Regime — The current state of implied volatility relative to its recent history. Is IV elevated, compressed, or transitioning?

Together, these views tell you not just where structural pressure exists (that's the Price Levels's job), but how the market feels about future uncertainty — and where it might be mispricing risk.

Reading Skew for Market Sentiment

The skew chart plots IV against strike price. In a normal market, the curve slopes down from left (OTM puts) to right (OTM calls) — puts are more expensive because demand for protection keeps their IV elevated.

What to look for:

Skew steepness tells you fear levels. A steep curve means heavy demand for downside protection. A flat curve means complacency or balanced positioning.

Skew changes matter more than absolute levels. If skew was flat last week and is now steep, fear is building — even if IV levels look "normal." This transition often precedes selloffs.

Call-side skew is less common but powerful. When OTM call IV starts rising (skew flattens or inverts on the upside), it signals aggressive upside speculation or hedging. This can fuel gamma squeezes.

Scenario: AAPL shows steep put skew at the weekly expiration but flat skew at the monthly. This tells you near-term fear is elevated (maybe earnings, an event), but the market doesn't expect it to persist. The weekly options are pricing in a move that the monthly options don't confirm — a potential vol crush setup.

Using Term Structure for Timing

The term structure chart plots IV across expirations. The shape tells you about the market's event expectations.

Contango (normal) — Near-term IV lower than far-term. The market is calm with no imminent catalysts. This is the default state.

Backwardation — Near-term IV higher than far-term. The market expects something to happen soon. Common before earnings, FOMC meetings, CPI releases.

Kink — A single expiration has elevated IV while others are normal. This pinpoints exactly when the market expects the event impact.

Trading with term structure:

Before events: backwardation tells you the market is pricing in a move. If you think the event will be a non-event, selling near-term options (vol crush play) has structural backing.

After events: watch for term structure normalization. The snap from backwardation to contango often coincides with a directional move as hedges are unwound.

The Volatility Scan overlays the current term structure against its 30-day average, so you can see if the current shape is unusual or normal for this ticker.

Scenario: Earnings Vol Analysis

Here's a practical Volatility Scan workflow for an earnings play:

AAPL reports earnings in 3 days. You open the Volatility Scan.

Term structure: steep backwardation. The weekly expiration (covering earnings) shows 45% IV while the monthly shows 28%. The market is pricing in a major move.

Skew: put skew is moderately steep. The market expects the move could be to the downside, but it's not extreme.

Historical comparison: the Volatility Scan shows that AAPL's pre-earnings IV is at the 70th percentile of the last 8 quarters. It's elevated but not at extremes.

Decision framework: the expected move (derived from the weekly IV) is ±4%. If you think AAPL won't move more than 3%, you could sell premium outside that range — but the 70th percentile IV means you're not getting historically cheap options to sell. The setup is marginal.

Alternatively, if you have a directional view, the steep put skew means puts are expensive. A bull thesis might be better expressed through calls or call spreads.

This entire analysis takes 2-3 minutes in the Volatility Scan and gives you a framework that most retail traders don't have.