Vega
TradingDefinition
Sensitivity of an option's price to a 1-percentage-point change in implied volatility. Long options are long vega (gain when IV rises); short options are short vega.
Pre-event positioning: traders typically buy vega before earnings, FOMC, FDA decisions — and lose theta + vega both after the event when IV crushes. Calendar spreads and back-month options have higher vega than near-month.
Pre-event positioning: traders typically buy vega before earnings, FOMC, FDA decisions — and lose theta + vega both after the event when IV crushes. Calendar spreads and back-month options have higher vega than near-month.