Today I would like to talk a little about an important measure in the options world – volatility, and how it affects how much you pay for an option (either put or call).
Volatility’s Impact on Option Prices
Volatility is the sole variable that can only be measured after the option prices are known. All the other variables have precise mathematical measurements, but volatility has an essentially emotional component that defies easy understanding. If option trading were a poker game, volatility would be . . .