Unit 3 · Level 1 · The greeks
Vega: the volatility dial
VEGA measures how much your option's price changes when implied volatility moves one point. Vega 0.20? IV ticks up one point and your option gains about €0.20, stock untouched. Every long option is secretly two bets: one on the stock (delta) and one on the price of movement itself (vega). Trading League 5 called gamma and vega 'the fast greeks' for a reason.
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What you get asked
Your option's vega is 0.20 and IV rises one point. The option…
Vega is currency per IV point. It's how volatility changes hit your P&L without the stock moving a cent.
Match each position to its vega profile.
More time means more room for volatility to matter, so long-dated options are the most volatility-sensitive things on the chain.
An IV drop can cheapen your call even while the stock ___.
Delta pulls the call up, vega drags it down, and vega can win. This is the exact mechanism behind the earnings trap coming in Unit 4.
Which position feels a change in IV the most?
Vega concentrates where extrinsic value lives: at the money, with plenty of time left. Expiring options are nearly all fact, no possibility.
Vega means buying an option is partly a bet on…
Before you buy, ask two questions: am I right about the stock, AND am I buying movement at a fair price? Ignore the second and IV will invoice you. 🐜
The rest of this unit
Delta, theta, vega, gamma: the four dials on every option's dashboard.