What is Vega?
How much an option price moves for a 1-vol-point change in implied volatility.
Definition
Vega (ν) is the option's sensitivity to implied volatility. A vega of 0.12 means the option gains $0.12 for every 1-point rise in IV (e.g. VIX 18 → 19). Long options always have positive vega; short options have negative. Vega is highest at-the-money and longer-dated; 0DTE options have minimal vega.
Why it matters for trading
- Vega is why "long calls" can lose money even when the underlying rallies. A rally with a vol crush (IV drops) hands the rally gain to gamma but takes back a large slice via vega.
- Macro events (CPI, NFP, FOMC) reprice IV before they reprice spot. Vega-driven repricing is often 2-3× the spot move on print day — the option market is paying you for the variance, not the direction.
- Vol-of-vol (VVIX) is essentially the *vega* of the VIX itself. When VVIX is elevated, vega trades themselves get hedged more aggressively.