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Vega (ν)

Vega measures how much an option's price changes when implied volatility moves by 1 percentage point.

Key Properties​

Always positive: For both calls and puts
Highest at: ATM, longer expiry
Units: $ per 1% IV change

How Vega Works​

Higher implied volatility = higher option prices. Vega tells you the sensitivity:

  • Vega = 0.10 means the option gains $0.10 if IV rises 1%
  • If IV drops 5%, the option loses $0.50

Vega by Position​

Position
Vega
Effect
Long call
+
Profit when IV rises
Long put
+
Profit when IV rises
Short call
−
Profit when IV falls
Short put
−
Profit when IV falls

Option buyers are long vega. Option sellers are short vega.

Vega by Moneyness and Time​

Factor
Higher Vega
Moneyness
ATM options
Time
Longer-dated options

ATM options are most sensitive to IV changes. Deep ITM/OTM options have less vega because their value is dominated by intrinsic value or near-zero.

Why Vega Matters​

In crypto, volatility moves significantly:

Scenario
Effect
Vol crush after event
All options lose value
Vol spike on news
All options gain value
Buying before volatility
Long vega bet
Selling high IV
Short vega bet

Vega vs Theta​

💡

Both affect extrinsic value, but differently: Theta erodes value over time (certain). Vega reflects value changes from IV (uncertain). High vega options have high theta - you pay for volatility exposure.

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