What is Vega (Options Greek) ?
Vega, an essential component of options Greek, represents the sensitivity of an option's price to changes in implied volatility. When implied volatility increases, options tend to become more expensive due to the increased uncertainty about future price movements. Conversely, when implied volatility decreases, options generally become cheaper. Vega helps options traders and investors gauge the impact of changes in volatility on option prices, enabling them to adjust their strategies accordingly to manage risk and optimize potential returns. Understanding Vega is crucial for effectively navigating the complex world of options trading, as it provides insights into how market volatility can influence option valuations.
How to Calculate Vega (Options Greek)?
Vega (Options Greek) calculator uses Vega = Change in Option Premium/Change in Volatility of Underlying Asset to calculate the Vega, The Vega (Options Greek) measures the sensitivity of an option's price to changes in implied volatility, indicating how much the option's value will change for a one-point increase in volatility. Vega is denoted by ν symbol.
How to calculate Vega (Options Greek) using this online calculator? To use this online calculator for Vega (Options Greek), enter Change in Option Premium (ΔV) & Change in Volatility of Underlying Asset (Δσ) and hit the calculate button. Here is how the Vega (Options Greek) calculation can be explained with given input values -> 2 = 2.5/1.25.