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Why it changed4 minute read
Why did my option target change since yesterday?
Learn why the underlying price required for the same option premium can change when time or volatility inputs move
Prepared by Mark · Primary sources below
Direct answer
The premium you selected may be unchanged while the underlying price estimated to support it moves from one day to the next. That required price is an output of the contract, checkpoint, remaining time, volatility, rates, and dividend assumptions available in each snapshot. When even one input changes, yesterday's condition and today's condition are not answers to the same scenario
The calendar shortens the route to the checkpoint
Keeping the same calendar checkpoint does not keep time constant. A day passing leaves fewer days for the underlying to move and less time value in the option. The effect is not a fixed daily deduction because theta itself changes with moneyness, volatility, and the remaining term
Fresh implied volatility rewrites the premium input
Implied volatility is derived from current option prices and can rise or fall between observations. A different volatility input changes the modeled time value at the checkpoint, which can move the underlying price required to reach the same selected premium even when the contract and target have not changed
The dominant influence can switch
Time may explain more of one update while volatility explains more of another. The effects also interact: a later checkpoint comparison begins with a different amount of time and potentially a different sensitivity to volatility. A single Greek should not be declared the reason without holding the other inputs constant and comparing scenarios
Compare the inputs before the two answers
Place the earlier and current calculations side by side with their quote times, checkpoints, volatility assumptions, rates, and dividends. If the inputs differ, describe how the required condition moved under those assumptions. That is more precise than treating either output as a corrected forecast of the stock
Common questions
Should the required underlying price change by the same amount every day?
No. Option pricing is nonlinear, and the sensitivities change as the underlying moves, expiration approaches, and implied volatility changes. A one-day comparison is specific to its two snapshots
Does a new target estimate mean yesterday's result was wrong?
Not necessarily. If yesterday's output used a different amount of remaining time or another volatility input, it described a different condition. An error is a separate question from an estimate becoming stale
Sources and further reading
See the condition behind your target
Choose a contract, target premium, and checkpoint to see what changes when time or implied volatility moves
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