What Is ‘Vega’ and How Does It Measure an Option’s Sensitivity to Implied Volatility?

Vega is one of the options Greeks and measures the change in an option's price for every one-percent change in implied volatility. For example, a Vega of 0.10 means the option price will increase by $0.10 if implied volatility rises by 1%.

Vega is highest for at-the-money options with a long time until expiration. Traders use Vega to manage their exposure to volatility risk, aiming for a 'vega-neutral' portfolio if they do not want to bet on IV changes.