How Is Vega Related to Implied Volatility and Option Pricing?

Vega is the option Greek that measures the sensitivity of an option's price to a one-point change in implied volatility (IV). A high Vega means the option's price will change significantly if IV moves.

Vega is always positive for a long option position. Since IV is a key determinant of extrinsic value, Vega is a crucial factor in pricing, especially for longer-dated options.