Vega
Definition
The rate of change of an option's price relative to a 1% change in implied volatility.
Explanation
Vega measures an option's sensitivity to changes in implied volatility. A vega of 0.15 means the option price changes by $0.15 for each 1% change in IV. Long options have positive vega (benefit from rising IV); short options have negative vega (benefit from falling IV). Vega is highest for at-the-money options with distant expirations. Before earnings announcements, IV rises (increasing vega-exposed positions). After earnings, IV collapses ('volatility crush'), damaging long option positions even if the stock moves in the right direction.
How Stoquity Uses This
Stoquity incorporates vega analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.