How Do ‘Greeks’ like Vega and Gamma Influence a Market Maker’s Risk in a High IV Environment?

Vega measures an option's price sensitivity to a 1% change in Implied Volatility (IV). High IV increases Vega risk, meaning the market maker faces greater loss if IV suddenly drops.

Gamma measures the rate of change of Delta. High Gamma means the Delta hedge must be rebalanced more frequently, incurring higher transaction costs and greater exposure to adverse price moves.

The spread widens to cover these magnified risks.