How Can a Trader Use Vega to Speculate on Implied Volatility?
Vega measures an option's sensitivity to a 1% change in implied volatility. A trader can use Vega to speculate on whether they believe the market is under- or overestimating future price swings.
If a trader expects implied volatility to rise, they will buy options (long Vega). If they expect it to fall, they will sell options (short Vega).
This allows them to profit from volatility changes independent of the underlying asset's price movement.
