What is Vega?
How much an option's price changes for each 1-point rise in implied volatility; longer-dated, at-the-money options have more Vega.
Learn “Vega” in an animated lesson
- Advanced Option StrategiesCalendar Spreads: Profiting from Different Decay Speeds
Sell a near-month option and buy a far-month option at the same strike. The near month's time value melts fast and the far month's slowly; if the stock sits near the strike, that speed difference is your profit.
- Advanced Option StrategiesChoosing a Strategy from Your View
Answer two questions first: do you think it'll rise, fall or stay put? Will volatility grow or shrink? The answers lead you to the matching strategy.
- Advanced Option StrategiesVega and Implied Volatility
Option prices hide the market's expectation of future swings. Work backward from the price and you get implied volatility; how much the option price changes per 1 percentage point of it is Vega.
Related terms
See how “Vega” works for yourself with an animation you can drag and play.
Go to “Calendar Spreads: Profiting from Different Decay Speeds”