Vega
How much an option’s price changes for a one-point move in implied volatility.
Also called: option vega
In plain language
Vega measures sensitivity to volatility expectations rather than to price. A vega of 0.12 means the option gains about $0.12 if implied volatility rises one point.
Long options always have positive vega. Rising volatility helps them; falling volatility hurts, even when the underlying moves the right way.
Vega is largest for at-the-money options with more time remaining.
Why it matters
Vega explains the most confusing outcome in options: being right on direction and still losing money because volatility collapsed after an event.
Common mistakes
- Buying elevated-volatility options right before an event and being crushed by the post-event drop.
- Attributing a loss to the wrong cause when volatility, not price, moved against you.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
The market’s expectation of future price movement, derived from option prices.
The price paid for an options contract.
How much value an option loses per day purely from the passage of time.
How much an option’s price moves for a $1 move in the underlying.
A company’s scheduled quarterly disclosure of financial results.