Option Vega

What Option Vega Is

Vega is one of the “option Greeks“, although there is no letter named “vega” in the Greek alphabet.

It measures sensitivity of the option’s price to changes in volatility.

Mathematically, vega is the first derivative of option’s price with respect to volatility.

Option Vega Interpretation

The number you see as vega shows how much the option’s price changes when implied volatility rises by 1 percentage point per annum. The units of vega are same as option’s and underlying price – usually dollars per share (or some other currency).

Vega Values

Vega is positive for long option positions (both calls and puts); negative for short.

Other things being equal, vega is highest for at the money options and converges to zero on both tails (far out of the money and deep in the money).

Vega also generally declines with passing time (options with longer time left to expiration have higher vega than similar options with less time to expiration).

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