What is 'Vega'
Vega is the measurement of an option's sensitivity to changes in the volatility of the underlying asset. Vega represents the amount that an option contract's price changes in reaction to a 1% change in the implied volatility of the underlying asset. Volatility measures the amount and speed at which price moves up and down, and is often based on changes in recent, historical prices in a trading instrument.
BREAKING DOWN 'Vega'
Vega changes when there are large price movements (increased volatility) in the underlying asset, and falls as the option approaches expiration. Vega is one of a group of Greeks used in options analysis and is the only lower order Greek that is not represented by a Greek letter.Differences Between Greeks
One of the primary analysis techniques utilized in options trading is the Greeks – measurements of the risk involved in an options contract as it relates to certain underlying variables. Vega measures the sensitivity to the underlying instrument's volatility. Delta measures an option's sensitivity to the underlying instrument's price. Gamma measures the sensitivity of an option's delta in response to price changes in the underlying instrument. Theta measures the time decay of the option. Rho measures an option's sensitivity to a change in interest rates.
Implied Volatility
As stated previously, vega measures the theoretical price change for each percentage point move in implied volatility. Implied volatility is calculated using an options pricing model and determines what the current market prices are estimating an underlying asset's future volatility to be. However, the implied volatility may deviate from the realized future volatility.
Vega Example
The vega could be used to determine whether an option is cheap or expensive. If the vega of an option is greater than the bidask spread, then the options are said to offer a competitive spread, and the opposite is true. For example, assume hypothetical stock ABC is trading at $50 per share in January and a February $52.50 call option has a bid price of $1.50 and an ask price of $1.55. Assume that the vega of the option is 0.25 and the implied volatility is 30%. Therefore, the call options are offering a competitive market. If the implied volatility increases to 31%, then the option's bid price and ask price should increase to $1.75 and $1.80, respectively. If the implied volatility decreased by 5%, then the bid price and ask price should theoretically drop to 25 cents and 30 cents, respectively.

Theta
A measure of the rate of decline in the value of an option due ... 
Vomma
Vomma is the rate at which the vega of an option will react to ... 
Calendar Spread
A calendar spread is a lowrisk, directionally neutral options ... 
Gamma Neutral
A method of managing risk in options trading by establishing ... 
Speed
The rate at which the gamma of an option or warrant will change ... 
Change
For an options or futures contract, change is the difference ...

Trading
Getting To Know The "Greeks"
Understanding price influences on options positions requires learning about delta, theta, vega and gamma. 
Trading
The Anatomy of Options
Find out how you can use the "Greeks" to guide your options trading strategy and help balance your portfolio. 
Trading
An Option Strategy for Trading Market Bottoms
A reverse calendar spread offers a lowrisk trading setup with profit potential in both directions. 
Trading
Implied vs. Historical Volatility: The Main Differences
Discover the differences between historical and implied volatility, and how the two metrics can determine whether options sellers or buyers have the advantage. 
Trading
Stock Options: What's Price Got To Do With It?
A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.

What does negative vega mean for credit spreads?
Learn about the option Greek vega, credit spreads and how vega affects the values of option credit spreads when volatility ... Read Answer >> 
How does implied volatility impact the pricing of options?
Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options. Read Answer >> 
What is the relationship between implied volatility and the volatility skew?
Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ... Read Answer >> 
How is implied volatility for options impacted by a bearish market?
Learn why implied volatility for option prices increases during bear markets, and learn about the different models for pricing ... Read Answer >> 
How is implied volatility used in the BlackScholes formula?
Learn how implied volatility is used in the BlackScholes option pricing model, and understand the meaning of the volatility ... Read Answer >> 
How are Bollinger Bands® used in options trading?
Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets ... Read Answer >>