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+Chapter 37: How Volatility Affeds Popular Strategies 
+TABLE 37-3 
+Implied 
+Stock Price Volatility 
+50 10% 
+30% 
+50% 
+70% 
+100% 
+150% 
+200% 
+Theoretical 
+Coll Price 
+1.34 
+3.31 
+5.28 
+7.25 
+10.16 
+14.90 
+19.41 
+753 
+Vega 
+0.097 
+0.099 
+0.099 
+0.098 
+0.096 
+0.093 
+0.088 
+of a 6-month call option with differing implied volatilities. Suppose one buys an 
+option that currently has implied volatility of 170% (the top curve on the graph). 
+Later, investor perceptions of volatility diminish, and the option is trading with an 
+implied volatility of 140%. That means that the option is now "residing" on the sec­
+ond curve from the top of the list. Judging from the general distance between those 
+two curves, the option has probably lost between 5 and 8 points of value due to the 
+drop in implied volatility. 
+Here's another way to think about it. Again, suppose one buys an at-the-money 
+option (stock price = 100) when its implied volatility is 170%. That option value is 
+marked as point A on the graph in Figure 37-1. Later, the option's implied volatility 
+drops to 140%. How much does the stock have to rise in order to overcome the loss 
+of implied volatility? The horizontal line from point A to point B shows that the 
+option value is the same on each line. Then, dropping a vertical line from B down to 
+point C, we see that point C is at a stock price of about 109. Thus, the stock would 
+have to rise 9 points just to keep the option value constant, if implied volatility drops 
+from 170% to 140%. 
+IMPLIED VOLATILITY AND DELTA 
+Figure 37-1 shows another rather unusual effect: When implied volatility gets very 
+high, the delta of the option doesn't change much. Simplistically, the delta of an 
+option measures how much the option changes in price when the stock moves one 
+point. Mathematically, the delta is the first partial derivative of the option model with 
+respect to stock price. Geometrically, that means that the delta of an option is the 
+slope of a line drawn tangent to the curve in the preceding chart.