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+760 Part VI: Measuring and Trading Volatility 
+Finally, to be able to completely compare this example with the previous one, it 
+is necessary to see what implied volatility would have to rise to in order to offset the 
+effect of yet another month's time decay. It turns out to be over 140%: 
+Stock Price: 
+Strike Price: 
+Time Remaining: 
+Implied Volatility: 
+Theoretical Call Value: 
+100 
+100 
+1 month 
+140.9% 
+16.45 
+Table 37-4 summarizes the results of these examples, showing the levels to 
+which implied volatility would have to rise to maintain the call's value as time passes. 
+Are the volatility increases in the latter example less likely to occur than the 
+ones in the former example? Probably yes - certainly the last one, in which implied 
+volatility would have to increase from 80% to nearly 141 % in order to maintain the 
+call's value. However, in another sense, it may seem more reasonable: Note that the 
+increase in volatility from 20% to 26% is a 30% increase. That is, 20% times 1.30 
+equals 26%. That's what's required to maintain the call's value for the lower volatility 
+over the first month - an increase in the magnitude of implied volatility of 30%. At 
+the higher volatility, though, an increase in magnitude of only about 25% is required 
+(from 80% to 99%). Thus, in those terms, the two appear on more equal footing. 
+What makes the top line of Table 37-4 appear more likely than the bottom line 
+is merely the fact that an experienced option trader knows that many stocks have 
+implied volatilities that can fluctuate in the 20% to 40% range quite easily. However, 
+there are far fewer stocks that have implied volatilities in the higher range. In fact, 
+until the Internet stocks got hot in the latter portion of the 1990s, the only ones with 
+volatilities like those were very low-priced, extremely volatile stocks. Hence one's 
+experience factor is lower with such high implied volatility stocks, but it doesn't mean 
+that the volatility fluctuations appearing in Table 37-4 are impossible. 
+If the reader has access to a software program containing the Black-Scholes 
+model, he can experiment with other situations to see how powerful the effect of 
+implied volatility is. For example, without going into as much detail, if one takes the 
+case of a 12-month option whose initial implied volatility is 20%, all it takes to main-
+TABLE 37-4 
+Initial Implied 
+Volatility 
+20% 
+80% 
+Volatility Leveled Required to Maintain Call Value ... 
+... After One Month ... After Two Months 
+26% 
+99% 
+38% 
+141%