**What is options vega? **

**Introduction**

Don’t know what options vega is? You’re not alone. Many traders don’t fully understand the concept, but it’s essential to know if you want to **trade options successfully**. Vega is one of the **Greeks** that helps us measure the **risk **associated with volatility. In this post, we’ll explain what vega is and how you can use it to your advantage when **trading options**.

**Key Takeaways**

**When you hear vega, think implied volatility (not historical)****Vega measures the relationship between an option price’s value and changes in implied volatility of an underlying asset. In other words, vega is a measure of an option’s sensitivity to changes in implied volatility.****Long options contracts have positive vega while short options contracts have negative theta.****Vega only affects the extrinsic value of an options contract.**

**What does vega mean in options?**

Options Vega is a measure of an option’s sensitivity to changes in implied volatility. It is one of the so-called “greeks” used by options traders to gauge an option’s potential profit or loss. A positive vega means that the option’s price will increase as implied volatility rises. Conversely, a negative vega means that the option’s price will fall as implied volatility decreases.

**Is higher or lower vega better?**

Options with a high vega are more sensitive to changes in **volatility** than options with a low vega. Options with a high vega are also typically more expensive than options with lower vega. If a trader is long on a trade, higher vega will result in more significant changes to the value of the options contract.

**How does vega affect option price?**

Vega measures the *rate of change* in the price of an option in relation to changes in the underlying asset’s volatility. **In other words, vega is a measure of an option’s sensitivity to changes in implied volatility**. Higher vega means that the option’s price is *more* sensitive to changes in implied volatility. Conversely, lower vega means that the option’s price is *less* sensitive to changes in implied volatility. Vega is at its highest when an options contract is at the money (ATM).

A trader who is long options vega will want to see implied volatility increase, while a trader who is short options vega will want to see implied volatility decrease. All else being equal, a rise in implied volatility will cause the price of an option to increase, while a fall in implied volatility will cause the price of an option to decrease.

Options vega can also be used to hedge against changes in **implied volatility**. By taking offsetting positions in options vega, a trader can minimize the impact of changes in implied volatility on their portfolio.

**Vega and options expiration**

Options Vega is important because it can help traders identify how volatile an option might become as its expiration date approaches. The longer an options contract has until **expiration**, the more potential it has for price changes. This means that longer-dated options contracts will have a higher vega value because vega is time sensitive. Vega’s value will decrease as it approaches expiration.

**In Conclusion**

Vega measures the sensitivity of an options contract to changes in implied volatility. Vega is at its highest when it’s at-the-money (ATM) and decreases as an options contract nears expiration. Although vega is not as crucial as delta or theta, understanding how vega works will help you to be a more profitable options trader.

**FAQs**

**What does vega mean in options?**Options Vega is a measure of an option’s sensitivity to changes in implied volatility. Vega is higher when an options contract is at-the-money.

**How does vega affect option price?**A higher Options Vega means that the option’s price is *more* sensitive to changes in implied volatility. Conversely, a lower Options Vega means that the option’s price is *less* sensitive to changes in implied volatility. If a trader is long on a trade, higher vega will result in more significant changes to the value of the options contract.

**How do you use Vega options?**A trader who is long options vega will want to see implied volatility increase, while a trader who is short options vega will want to see implied volatility decrease. All else being equal, a rise in implied volatility will cause the price of an option to increase, while a fall in implied volatility will cause the price of an option to decrease.