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+The Intelligent Investor’s Guide to Option Pricing  •  69
+Now let’s say that our analysis is absolutely right. Just after we buy the 
+call options, the company makes its announcement, and the shares pop up 
+by 5 percent. This changes the strike–stock price ratio from 1.05 to 1.00. 
+All things being held equal, this should increase the price of the option 
+because there would be a larger portion of the range of exposure contained 
+within the BSM cone.
+However, as the stock price moves up, let’s assume that not everything 
+remains constant but that, instead, implied volatility falls. This does hap-
+pen all the time in actuality; the option market is full of bright, insightful 
+people, and as they recognize that the uncertainty surrounding a product 
+announcement or whatever is growing, they bid up the price of the options 
+to try to profit in case of a swift stock price move.
+In the preceding diagram, we’ve assumed an implied volatility of 35 
+percent per year. Let’s say that the volatility falls dramatically to 15 percent 
+per year and see what happens to our diagram:
+20
+25
+30
+35
+40Stock Price
+45
+50
+55
+60
+Advanced Building Corp. (ABC)
+65
+Stock price jumps
+Implied volatility drops
+GREEN
+The stock price moves up rapidly, but as you can see, the BSM cone shrinks 
+as the market reassesses the uncertainty of the stock’s price range in the 
+short term. The tightening of the BSM cone is so drastic that it more than 
+offsets the rapid price change of the underlying stock, so now the option is 
+actually worth less!