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
Option buyers are long vega. Option sellers are short vega.
Vega by Moneyness and Time
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:
Vega vs Theta
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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.
Related:
- The Greeks - Overview of all Greeks
- Black-Scholes Model - How vega is derived