Why Index Options premium is very high before any events announcement as with normal days?
it is because of vega, a option greek… go thru the following article…
as you said when there is an event, anything could happen, hence the volatility will increase. Volatility is directly proportional to option premium. If volatility increases it will increase the premium as well. Once the event occurs, volatility drops and hence the option premium. Hope this helps.
How would you price the Life Insurance premium for a teacher Vs. someone in the dangerous field (Navy/Airforce).Put the same logic here since NOBODY knows the outcome of the event.