Now that you're familiar with an option's anatomy, it's time to discuss an option's behavior. Here, in Option Behavior, we explain how implied volatility, time decay, and changes in the underlying stock price cause intrinsic value and time value to change.

At times, you may find that your open P&L is different from what you might have expected based on, for example, a change in the stock price. Unexpected results like this are generally less surprising when you have a solid understanding of how implied volatility, decay, and stock price affect the option price.  The knowledge exchanged in this section can help to replace future confusion and frustration with insight and understanding.

In the next section, Decision Making, we provide some novel ideas on how to interpret the "cost and compensation" generated by implied volatility and time decay relative to the behavior of the stock price. This will put you on the road to making sophisticated and timely trading decisions.