Define the Term 'Vega' and Explain Its Relationship with Implied Volatility ⎊ Path

Define the Term ‘Vega’ and Explain Its Relationship with Implied Volatility.

Vega is an option Greek that measures the sensitivity of the option's price to a 1% change in implied volatility (IV). Implied volatility is the market's expectation of future price movement of the underlying asset, and Vega quantifies the risk associated with changes in this expectation.

A high Vega means the option price is very sensitive to changes in IV. Vega is highest for At-the-Money (ATM) and long-dated options.

All long option positions have positive Vega, meaning their value increases when IV rises.

How Does Vega Measure an Option’s Sensitivity to Market Sentiment?

Define the ‘Vega’ Option Greek and Its Relationship to Volatility

What Is the ‘Delta’ of an Option and How Does It Change as the Option Moves ITM?

Explain the Relationship between Implied Volatility and Options Pricing (Vega)

How Is the ‘Vega’ Greek Derivative Related to the Impact of Volatility on Option Price?

Which Option Greek Measures the Sensitivity of an Option’s Price to Changes in IV?

Explain Delta and Its Role in Hedging Option Positions

What Is the Practical Difference between a ‘Vega’ of 0.10 and a ‘Vomma’ of 0.01?

Glossar

Long Option Positions

Option Profile ⎊ Long Option Positions involve the outright purchase of call or put options, granting the holder the right, but not the obligation, to buy or sell the underlying crypto asset at a specified strike price before expiration.

Implied Volatility

Expectation ⎊ This value represents the market's consensus forecast of future asset price fluctuation, derived by reversing option pricing models using current market premiums.