All else equal, options written on volatile assets are worth more than options written on safer assets.

Question

Quizplus · Accepted Answer

This is because options give the holder the right, but not the obligation, to buy or sell the underlying asset at a certain price at a certain time. If the underlying asset is more volatile, there is a higher chance that the price of the asset will move significantly, giving the option holder a greater potential profit. Therefore, the option writer would need to charge a higher premium to compensate for the increased risk.

All Else Equal, Options Written on Volatile Assets Are Worth