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Glossary
Vega
Definition
A measure used to describe the change in value of an option when the volatility of the underlying asset changes.
What is vega?
In options trading, vega measures the sensitivity of an option's price to changes in the volatility of the underlying asset. A high vega means the option's price is highly sensitive to changes in volatility. Vega is particularly important for options that have a longer time until expiration.
Why is vega important to consider when trading?
Vega is a key metric for options traders, as volatility can significantly impact the value of options. Understanding vega helps traders predict how much an option’s price might change as market volatility changes. This is crucial for traders who use strategies that depend on volatility movements and for those looking to hedge against or benefit from changes in market volatility.