Selling an option is equivalent to selling volatility in the underlying asset.

Question

Quizplus · Accepted Answer

Selling an option involves selling the right to buy or sell the underlying asset at a certain price, which can be seen as selling volatility in the price of the underlying asset. As the price of the underlying asset becomes more volatile, the value of the option increases, making it more expensive to buy. Therefore, selling an option is equivalent to selling volatility in the underlying asset.

Selling an Option Is Equivalent to Selling Volatility in the Underlying