ARTICLE SYNOPSIS ...Trading clues from options volatility by Dave Caplan The significance of volatility is overlooked and underestimated by most traders in the options area. This includes both the effect of volatility on the premium cost of an option when purchased, and the effect of future changes in volatility on a position. Volatility is simply a mathematical computation (I use a ""modified"" Black-Scholes model.) of the magnitude of movement in an option. This is based of course, on the activity in the underlying futures market. If the market is making a rapid move up or down, volatility will rise. In a qui...