How Does an Unexpected News Event for a Cryptocurrency Affect the Extrinsic Value of Its Options? ▴ Learn

How Does an Unexpected News Event for a Cryptocurrency Affect the Extrinsic Value of Its Options?

An unexpected news event, especially one that creates significant uncertainty or potential for a large price swing (e.g. a regulatory announcement or major hack), will cause the implied volatility (IV) to spike. Since extrinsic value is directly tied to IV, this spike will cause the extrinsic value of all options, particularly ATM ones, to increase dramatically.

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