Definition
Vega is an options Greek that measures sensitivity to changes in implied volatility. A 1% increase in IV raises the option price by the vega amount. Vega is highest for at-the-money options with longer expirations. Long options have positive vega (benefit from rising IV).
Formula
Example
An option with 0.15 vega will gain $15 per contract if IV rises from 30% to 31%.
FAQ
What is Vega (Options Greek)?
Measures how much an option price changes for a 1% change in implied volatility.
How do you calculate Vega (Options Greek)?
A common formula for Vega (Options Greek) is: Vega = Change in Option Price / 1% Change in IV
Why is Vega (Options Greek) important?
Vega (Options Greek) helps investors evaluate options and make more informed decisions.
Related Terms
Implied Volatility (IV)
The market's expectation of future price volatility implied by option prices.
Delta (Options Greek)
Measures how much an option price changes for a $1 move in the underlying.
Theta (Options Greek)
Measures how much an option loses value each day due to time decay.
Gamma (Options Greek)
Measures the rate of change in delta for a $1 move in the underlying.