Options

Vega

How much an option’s price changes when implied volatility moves.

Vega measures sensitivity to implied volatility. When IV rises, option prices rise (good for buyers, bad for sellers); when IV falls, they drop. This is why selling options into high IV, then watching IV collapse after an event, can be profitable even if the stock barely moves.

For example

You sell a put before earnings when IV is high. After earnings, IV drops sharply (an IV crush), and the put loses value fast, letting you buy it back cheap.

Related terms

Implied Volatility (IV)The GreeksOption Premium

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