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+762 Part VI: Measuring and Trading Volatility 
+benefit if implied volatility merely returns to "normal" levels while you hold the posi­
+tion. Of course, having the underlying increase in price is also important. 
+Conversely, an option seller should be keenly aware of implied volatility when 
+the option is initially sold - perhaps even more so than the buyer of an option. This 
+pertains equally well to naked option writers and to covered option writers. If implied 
+volatility is "too low" when the option writing position is established, then an increase 
+(or worse, an explosion) in implied volatility will be very detrimental to the position, 
+completely overcoming the effects of time decay. Hence, an option writer should not 
+just sell options because he thinks he is collecting time decay each day that passes. 
+That may be true, but an increase in implied volatility can completely domin.ate what 
+little time decay might exist, especially for a longer-term option. 
+In a similar manner, a decrease in implied volatility can be just as important. 
+Thus, if the call buyer purchases options that are "too costly," ones in which implied 
+volatility is "too high," then he could lose money even if the underlying makes a mod­
+est move in his favor. 
+In the next chapters, the topic of just how an option buyer or seller should 
+measure implied volatility to determine what is "too low" or "too high" will be dis­
+cussed. For now, suffice it to grasp the general concept that a change in implied 
+volatility can have substantial effects on an option's price far greater effects than the 
+passage of time can have. 
+In fact, all of this calls into question just exactly what time value premium is. 
+That part of an option's value that is not intrinsic value is really affected much more 
+by volatility than it is by time decay, yet it carries the term "time value premium." 
+TIME VALUE PREMIUM IS A MISNOMER 
+Many (perhaps novice) option traders seem to think of time as the main antagonist to 
+an option buyer. However, when one really thinks about it, he should realize that the 
+portion of an option that is not intrinsic value is really much more related to stock 
+price movement and/or volatility than anything else, at least in the short term. For 
+this reason, it might be beneficial to more closely analyze just what the "excess value" 
+portion of an option represents and why a buyer should not primarily think of it as 
+time value premium. 
+An option's price is composed of two parts: (1) intrinsic value, which is the "real" 
+part of the option's value - the distance by which the option is in-the-money, and (2) 
+"excess value" - often called time value premium. There are actually five factors that 
+affect the "excess value" portion of an option. Eventually, time will dominate them