The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we’re going to be answering the question, “Does volatility increase option values?” Volatility as a standalone is actually a double-edged sword and what I mean by this is that implied volatility can either help option values or it can hurt option values depending on which way implied volatility is moving. As a general rule, remember that when implied volatility is increasing, meaning the expectation that the stock will have a greater move in the future than it currently has or is expected to have, then we see option values on both sides, calls and put options increase in value to compensate for the higher expected move of the underlying stock. Again, when implied volatility is increasing, that does help increase the value of options on both sides. On the other side or on the flipside of the coin, when implied volatility is decreasing as we typically see after say an earnings event or a corporate announcement, then