Factors influencing implied volatility

by | Oct 24, 2009 | Uncategorized | 0 comments

The price of option like any other product is predominantly determined by the supply and demand for the product. The market makers who play a vital role in maintaining the balance between the supply and demand adjust the spread for the option product. When the demand for an option is more than the supply, then the market makers increase the price of the product and vice versa. The increase or decrease in the price of the product abruptly ceteris paribus, reflects the change in the implied volatility of the market for that product.

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