Options – Implied Volatility

Volatility is a measure of the speed at which a stock’s price changes over time. High-volatility stocks are more likely to make large percentage moves up or down, and therefore options on such stocks have a higher likelihood of expiring in the money, perhaps deep in the money. Therefore, options on stocks with high volatility will tend to have higher relative option premiums than stocks with lower volatility.

The Option Trader Handbook: Strategies and Trade Adjustments