Technical Definition

Vega

Vega estimates how much an option's price changes when implied volatility changes, all else equal.

By Crypto University Editorial
Implied Volatility (IV)Option PremiumTheta

✦ Key Insight

It is central to volatility trading and explains why option prices can move even when the underlying price is stable.

✕ Common Misconceptions

Vega is not constant and depends on strike, expiry, and market conditions.

Detailed Explanation

Options with more time remaining often have greater sensitivity to changes in implied volatility.

In Practice

“A BTC option rises in value after implied volatility jumps even though BTC price is nearly unchanged.”

Dig Deeper

Expiration Date

An expiration date is the date and time after which an option or expiring derivatives contract is no longer active.

Option Premium

Option premium is the price paid by an option buyer and received by an option seller for the contract.

Implied Volatility (IV)

Implied volatility is the volatility level that an option pricing model backs out from the option's current market price.

Delta

Delta estimates how much an option's price may change for a small change in the underlying asset price, all else equal.

Theta

Theta estimates how an option's value changes as time passes, all else equal.