ES 5-23-17 : Hot Topic

# Vega

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## Definition of 'Vega'

The change in the price of an option associated with a 1% change in implied volatility. This is technically the first derivative of the option price with respect to volatility. You may also see Vega referred to as eta, epsilon, omega and kappa. The terms that refer to the component calculations of options are often know as "The Greeks".

A large price movement in the underlying asset will cause a change in Vega (i.e. increased volatility). The value of Vega will also change if volatility is expected to increase. In other words, the underlying asset's price does not need to change, just the expectation that it will change is sufficient to change the value of Vega.

All the Greeks: Delta, Gamma, Vega, Theta, Vomma

A large price movement in the underlying asset will cause a change in Vega (i.e. increased volatility). The value of Vega will also change if volatility is expected to increase. In other words, the underlying asset's price does not need to change, just the expectation that it will change is sufficient to change the value of Vega.

All the Greeks: Delta, Gamma, Vega, Theta, Vomma

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