The effect of volatility on a call/put's price is
A)decreased price due to decreased possible losses
B)nominal volatility will not noticeably effect a call/put's price
C)increased price due to increased possible gains
D)decreased price due to increased possible losses
E)none of the above

Question

Quizplus · Accepted Answer

Increased volatility means there is a higher likelihood of the stock price moving significantly in the option holder's favor, resulting in greater potential gains for call option holders and greater potential profits for put option holders. This increased potential for profit leads to a higher demand for options, ultimately driving up their prices.

The Effect of Volatility on a Call/put's Price Is