I understand that apparently implied volatility of a call option increases as the underlying price of the stock deviates further and further from the moving average. That mostly makes sense, because traders anticipate a return to the mean and as the price strays further away from that more traders will be looking to buy or sell. Do I have that right?
What I don't understand is why this increased volatility on both the low side of the average and the high side make the option more expensive to purchase. On the low side, I see it. The stock is about to rebound and because higher stock prices mean higher option prices (for calls), there is a kind of synergistic effect to the rising price of the option. Why is the same true on the high side? It's clear the stock is about to see a sell-off and so the price of the stock would decrease causing a downward push on the option price.
My question is why does the volatility instead of working in the same direction before, cause an upward push of the price of the option instead? I guess this is good for a holder of the option because the volatility driving the price up is attempting to offset the downward push in price of the option from the stock losing value, but I'm just not understanding the exact rationale behind this.