Option Greeks for Traders : Part I : Delta, Vega & Theta (Volcube Advanced Options Trading Guides) by Gleadall Simon

Author:Gleadall, Simon [Gleadall, Simon]
Language: eng
Format: epub, mobi
Publisher: Volcube
Published: 2014-04-07T22:00:00+00:00

Vega

Basic definition and notes

Vega : The change in an option’s value for a change in implied volatility

Vega quantifies an option’s sensitivity to changes in implied volatility. It is typically normalised for ease of use. Vega is often given as the change in option value in ticks for 1% changes in implied volatility. For example, suppose an option has a value of $1.50, implied volatility of 25% and a vega of 5. This suggests that if implied volatility increases to 26%, the option value will increase to $1.55. If implied vol falls by 0.5% to 24.5%, the option value will drop to around $1.475, other things being equal.

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