What Happens to an Option's Price If IV Increases, All Else Equal? ⎊ Path

What Happens to an Option’s Price If IV Increases, All Else Equal?

If implied volatility (IV) increases, all else being equal, the option's price (premium) will increase. This is because the increase in IV leads to a higher time value component, as the probability of the option becoming profitable has increased.

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Glossar

Higher Time Value

Premia ⎊ Higher Time Value, within cryptocurrency options and financial derivatives, reflects the increased cost associated with contracts possessing extended expirations; this stems from the amplified uncertainty inherent in forecasting asset prices over longer durations, necessitating a larger risk premium for option sellers.