Volatility term structure is the pattern of implied volatility across option expirations for the same underlying market. It shows how volatility embedded in option prices changes with time horizon: short-dated options may carry higher, lower or similar implied volatility than longer-dated options. A meaningful comparison normally keeps the strike dimension as consistent as practical—for example, by comparing at-the-money options or comparable deltas—because changing both expiration and moneyness can mix volatility term structure with volatility skew.
What the slope does—and does not say
The term structure is not simply a forecast line for future realized volatility. Implied volatility is inferred from option prices, so differences across expirations can reflect expected future variability, event risk, volatility-risk compensation and option-market supply and demand. A known event concentrated inside one expiration window can therefore create a local hump: an option expiring after the event may embed substantially more volatility than one expiring before it, while the same event can have a smaller annualized effect on much longer-dated options. During acute market stress, short-dated implied volatility can also rise much faster than longer-dated volatility, producing an inverted structure.
The deeper arithmetic is in variance
Quoted implied volatilities are annualized standard deviations, but volatility itself is not the quantity that adds through time. Under a consistent variance and moneyness convention, each maturity can instead be expressed as total implied variance, approximately proportional to implied volatility squared multiplied by time to expiration. The difference between two compatible total-variance horizons can then be used to infer the forward variance priced for the interval between them. Consequently, forward volatility between two maturities is not obtained by simply subtracting one quoted implied-volatility percentage from another. This distinction matters especially around event dates, where a relatively small difference in headline volatility can conceal a concentrated amount of variance in a short interval.
Term structure is not the VIX futures curve
An option-implied volatility term structure should also be distinguished from a curve of volatility-futures prices. The former compares volatility inferred from options across different expiration horizons; the latter compares futures contracts that settle to a volatility index on different dates. They are economically related but are not interchangeable measurements.
Volatility term structure is therefore useful for locating where the options market is concentrating volatility pricing through time. Its interpretation still depends on comparable strikes or deltas, consistent calculation conventions and awareness of event timing. A steep, flat or inverted curve describes the current relative pricing of volatility horizons; by itself, it does not determine what realized volatility will ultimately be.