How Does the Volatility of the Underlying Asset Affect the Valuation of a Crypto Option?

The volatility of the underlying crypto asset is the single most important factor in the valuation of a crypto option. According to the Black-Scholes model, higher volatility increases the probability that the option will finish in-the-money, thus increasing the option's premium (price).

Since crypto assets are highly volatile, their options generally command higher premiums than options on traditional assets.