Options & derivatives
Vega
How much an option’s price changes when implied volatility moves by one point.
How it works
Vega is largest for options with long time to expiry. It is the sensitivity that catches out buyers of event-driven options, whose vega loss can swamp their directional gain.
Related terms
- Implied volatilityThe volatility the market is pricing into an option, derived from its premium.
- Volatility crushThe sharp fall in option prices after an anticipated event passes.
- PremiumThe price paid for an option, made up of intrinsic value plus time value.
- ThetaHow much value an option loses each day simply because time passes.
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All 30 Options & derivatives terms · The full glossary, 433 terms
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