Options Trading, Options Greeks, Volatility Trading, Moontower, Black Scholes Model.
(in years) So if there is 1 year until expiration, the 1 year ATM straddle on a 16% vol, $50 stock is $6.40 (.8 x 50 x .16). So if implied volatility goes up 1 point to 17% how much does the straddle change? .8 x 50 x.17 = $6.80 So the straddle increased by $.40 for a 1 point increase in vol.