Other things equal, the price of an option goes up as the volatility of the option decreases.

Question

Quizplus · Accepted Answer

The statement is false. The price of an option goes up as the volatility of the option increases. This is because higher volatility increases the chance that the option will end up in-the-money, which makes the option more valuable. Conversely, lower volatility decreases the chance of the option ending up in-the-money, and thus makes the option less valuable.

Other Things Equal, the Price of an Option Goes Up