How does historical volatility impact option pricing?

Option volatility

There are two volatility is important tu to select option pricing.if the implied volatility line is higher than the historical volatility line the option are are thought to be expensive.

 The other hand historical volatility is higher than implied volatility the options are thought to be not expensive.

There are two questions has been origin

What we really want to see it's just how expensive our options are.

what you are looking for is the skew between the historical and implied volatility.The closer these two numbers are together the smaller the skew. The smaller the skew the less expensive the options and better your chance will be covered the cost of the straddle. The wider the skew the more expensive the trader becomes and your chance of covering the straddle cost goes down.

Skew Pizza fancy math term for a difference for distance between two numbers.

Implied volatility age representation of the average analyst sentiment as to what they believe the volatility will be in the future.

Historical volatility how much the stock price has dropped around and moved based upon past data.

Trader always used above volatility in earnings season trading is as close to appointment style trading as you can get with just one strategy the option straddle strategy you could have paid their schedules for every quarter.

The study examine the market efficiency of exchange traded index option in India like NSE the predictive power of implied volatility of nifty index option. Use the implied volatility we want to see option volatility plotted against a range of user-specified strike price for a different option trading day.