Implied Volatility's Impact on Option Pricing

Market Parameters

Stock Price: $100
Implied Volatility: 30%

Option Parameters

Days to Expiration: 30
Strike Price: $100

Call Option

Premium: $0.00

Delta: 0.00

Theta: 0.00

Vega: 0.00

Put Option

Premium: $0.00

Delta: 0.00

Theta: 0.00

Vega: 0.00

Key Points About Implied Volatility:

  • Higher IV = Higher Option Premiums (both calls and puts)
  • IV tends to increase before major events (earnings, FDA announcements, etc.)
  • IV often decreases after the event (volatility crush)
  • At-the-money options are most sensitive to IV changes
  • Far out-of-the-money options have higher IV sensitivity relative to their price