Backwardation
A term-structure condition where near-term implied volatility is higher than longer-dated implied volatility.
Explanation
Backwardation usually appears around high-impact events (earnings, macro announcements) or market stress. It indicates the market expects more uncertainty in the short term than in the long term. Calendar and diagonal traders monitor backwardation closely because it affects relative pricing across expirations.
Example
AAPL 7-day ATM IV is 48%, while 45-day ATM IV is 31%. This is an inverted term structure (backwardation).