Skip to main content

How Does the Volatility of the Underlying Asset Affect the Price of an Option Contract?

Higher volatility in the underlying asset generally increases the price (premium) of both call and put option contracts. This is because higher volatility increases the probability that the asset's price will move significantly in either direction, making it more likely that the option will expire in-the-money, thus increasing its expected value.

How Does High Implied Volatility Affect the Premium of Both Call and Put Options?
How Does Volatility Impact the Premium Received When Selling a Call Option?
How Does a Higher Strike Price Affect the Premium of a Call Option?
How Does the Relationship between Delta and the Probability of an Option Expiring In-the-Money Affect Trading Strategy?