Volatility is mean-reverting and has a positive impact on options prices. In other words, periods of unusually low volatility are followed by increased price turbulence, which, in turn, boosts demand for options, making them pricier. Thus, traders tend to buy options when volatility is lower than its long-term average.
Join the conversation!
Please share your thoughts about this article below. We value your opinions, and would love to see you add to the discussion!