Skip to main content

Why Is a Trader Who Sells Options Typically Interested in a Decrease in Implied Volatility?

A trader who sells options (a short option position) is typically interested in a decrease in implied volatility (IV) because it will cause the option's premium to fall, allowing the trader to buy it back at a lower price for a profit. Since the seller is short Vega, a decrease in IV directly benefits their position.

They profit from the market's expectation of price movement subsiding.

Which Option Position Benefits from High Theta?
What Is a Crypto Order Book?
How Does a Naked Put Option Expose a Trader to Risk?
What Are the Legal Implications of a Financial Institution “Hacking Back” against a State-Sponsored Attacker?