SPY implied volatility consistently overstates realized volatility, creating an edge for premium sellers

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From 2016 to 2026, 30-day implied volatility (IV) for SPY has consistently exceeded 30-day realized volatility (RV), averaging a 3.18-point spread and occurring 84% to 88% of the time. This overstatement, which has not shrunk post-COVID and is currently widest in 2026 at 5.09 points, provides a consistent edge for premium sellers to generate small, consistent profits, but they face significant downside from large, fast moves during infrequent tail risk events when RV exceeds IV.