Abstract: This paper studies the cross-sectional determinants of delta-hedged stock option returns with an emphasis on the pricing of volatility risk. We find that the average delta-hedged option returns are significantly negative for most stocks, and their magnitudes increase monotonically with the volatility of the underlying stock.Writing covered calls on high volatility stocks on average earns about 2% more per month than selling covered calls on low volatility stocks. This spread is higher when it is more difficult to arbitrage between stock and option. The negative volatility risk premium may be compensation for option sellers who are unable to eliminate individual stock volatility risk. It may also indicate overvaluation of options on high volatility stocks.