How Does a Sharp Rise in Implied Volatility Affect the Value of Out-of-the-Money Put Options? ▴ Learn

How Does a Sharp Rise in Implied Volatility Affect the Value of Out-of-the-Money Put Options?

A sharp rise in implied volatility (IV) significantly increases the value of out-of-the-money (OTM) put options. IV is a key component of an option's extrinsic value (time value).

Higher IV means the market perceives a greater chance of a large price movement, making the OTM put more likely to finish in-the-money. This increased probability and time value cause a substantial rise in the put option's premium.

What Is the Difference in Maximum Loss between Buying an OTM Option and Buying an OTM Future?

How Does High Volatility Impact the Premium of an OTM Option?

Does Theta Decay Affect In-the-Money, At-the-Money, and Out-of-the-Money Options Equally?

Can an OTM Option Have Extrinsic Value? Explain