After the Budget session the volatility priced for the windows between expiries sat well below the front expiry
Each expiry has an implied volatility, and two expiries can be combined into one figure for the stretch between them. The method works on total variance. Square each implied volatility, multiply by its time to expiry, and subtract the nearer total from the further one. Divide by the time between the two expiries, and take the square root. The result is the forward volatility.
The chart uses the two days after the Budget session. On 2 Feb 2026 the nearest expiry, on 3 Feb, still priced a high volatility, and the segments show the volatility implied for each window after it. Every window sits below that front level, which is what a passing event looks like on a term structure.
Forward volatility is not a forecast. It is the volatility the prices imply once the nearer expiry is taken as the starting point. A rise in the forward figure against the nearer expiries means the prices assign more movement to that window. The calendar spread trades that difference directly.
The arithmetic has one condition. Total variance must rise with time. If the further expiry shows less total variance than the nearer one, the forward figure is not defined, and the calculator returns nothing. That happens when an expiry is priced too low for its time.
A long calendar, selling the near expiry and buying the far one, is long the forward window. It gains when that window is repriced higher, and it loses when the window is priced below the level paid. The payoff of the calendar depends on the index as well, so the forward figure is one part of the risk.
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study