How Does Time to Expiration Affect an Option’s Vega?
Vega is directly proportional to the time remaining until expiration. Options with a longer time to expiration (e.g.
90+ days) have a higher Vega. This is because there is more time for a change in expected volatility to influence the option's potential profitability, making long-dated options more sensitive to changes in Implied Volatility.
Glossar
Vega
Sensitivity ⎊ Vega, within the context of cryptocurrency options and financial derivatives, quantifies the rate of change in an option’s price with respect to changes in the underlying asset’s implied volatility.
Time to Expiration
Decay ⎊ Time to Expiration, within cryptocurrency options and financial derivatives, represents the remaining lifespan of a contract before its termination and potential exercise or assignment.
Extrinsic Value
Volatility ⎊ This component represents the portion of an option's premium driven by market uncertainty regarding the underlying crypto asset's future price movement.