This research examines the impact of volatility on option pricing in the Nigerian stock market, particularly within the context of the country’s recently introduced derivatives trading framework. Following the 2021 launch of the Nigerian Exchange Group’s derivatives market, concerns have emerged regarding the reliability of existing pricing models under local market conditions. The study analyses both historical and implied volatility to evaluate their respective impacts on option valuation, employing Generalized Autoregressive Conditional Heteroskedasticity (GARCH) techniques to capture time-varying volatility effects. Results reveal that implied volatility, which reflects investor expectations, tends to offer more accurate pricing cues than backward-looking historical measures. Nevertheless, factors such as limited market participation, liquidity constraints, infrastructure constraints, market inefficiencies and pricing inefficiencies continue to undermine the effective use of standard models like Black-Scholes in the Nigerian context. The study concludes that there is a critical need for pricing frameworks tailored to the specific volatility dynamics of emerging markets, alongside stronger regulatory oversight and investor education.