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+The Intelligent Investor’s Guide to Option Pricing  •  71
+because of the added uncertainty surrounding product liability claims. 
+Here is what the situation looks like now:
+20
+25
+30
+35
+40Stock Price 45
+50
+55
+Antelope Bicycle Corp. (ABC)
+60
+GREEN
+This time we were right that ABC’s implied volatility looked too cheap, but 
+because we were directionally wrong, our correct volatility prediction does us 
+no good financially. The stock has fallen heavily, and even with a large increase 
+in the implied volatility, our option is likely worth less than it was when we 
+bought it. Also, because the option is now further OTM than it originally was, 
+time decay is more pronounced. Thus, to the extent that the stock price stays at 
+the new $45 level, our option’s value will slip away quickly with each passing day.
+Rise in Volatility Amplifies Accurate Directional Prediction
+These examples have shown cases in which changes in option pricing 
+variables work to the investor’s disadvantage, but it turns out that changes 
+can indeed work to an investor’s advantage as well. For instance, let’s say 
+that we find a company—Agricultural Boron Co. (ABC)—that we think, 
+because of its patented method of producing agricultural boron com-
+pounds, is relatively undervalued. We decide to buy 10 percent OTM calls 
+on it. Implied volatility is sitting at around 25 percent, but our option is far 
+enough OTM that it is not very expensive.