Implied Volatility-Option

Hi,

thank you for your help and discusion. I found some answer now for the OPtion price. Last week, NVDA down 4% within 1 day, all the put options down. I asked why.

now i got a reply from the internet, but that is not a full reply. My question now became, what to do, or how to know in advance, so that will not buy put option even stock price down.

"Implied volatility represents the expected volatility of a stock over the life of the option. As expectations change, option premiums react appropriately. Implied volatility is directly influenced by the supply and demand of the underlying options and by the market's expectation of the share price's direction. As expectations rise, or as the demand for an option increases, implied volatility will rise. Options that have high levels of implied volatility will result in high-priced option premiums. Conversely, as the market's expectations decrease, or demand for an option diminishes, implied volatility will decrease. Options containing lower levels of implied volatility will result in cheaper option prices. This is important because the rise and fall of implied volatility will determine how expensive or cheap time value is to the option."



Read more:http://www.investopedia.com/articles/optioninvestor/08/implied-volatility.asp#axzz1V1En3Th9