Implied volatility and products movement

[Estrend]

Which is more important in moving up the value of a call option?

Increase in implied volatility or increase in product price? if the product price increase 10 points while implied volatility decreases. Would the net value increase the value of a call option or decrease the value of a call option?

 

[Martinghoul]

It depends... Specifically, the answer is sensitive to the time to expiry for your option. If you think about the trivial cases (always a very useful technique), you will see what I mean.

 

[tripleogstar]

well you need to look at the delta and vega of the option.

 

[Estrend]

triple, delta measure the how much call value change with a dollar change in the product price and vega is how much call value change with a one percent change in product implied volatility. Not possible to compare ... one is on percent change and the other is absolute change

 

[GammaJammer]

triple, delta measure the how much call value change with a dollar change in the product price and vega is how much call value change with a one percent change in product implied volatility. Not possible to compare ... one is on percent change and the other is absolute change

Of course it's possible to compare. Just work out what the standard delta change amount is, and express it as a percentage by looking at where the underlying is trading. HOW they're quoted is merely a matter of convention.

That's why that answer was the correct one. You asked a question that was impossible to answer without the relevant financials of the option position in question. Consider the difference between an atm option and a deep deep itm option to understand it better.

GJ