1 an article in a financial publication observes the higher, Ask an Expert

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1. An article in a financial publication observes: "The higher the expected volatility in stock prices, the higher the prices of put and call options will be." Briefly explain the reasoning behind this observation.

2. An article in the Wall Street Journal contains the following: Options traders were quick to take positions in retail companies Friday. . . . Target Corp. was among the active names in the sector, with investors picking up 68,000 calls . . . and 27,000 puts. . . . Options traders appeared to be taking a bullish approach to Target. . . . What does a "bullish approach" mean? Why does the data on options purchases indicate that traders were taking a bullish approach?

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