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Vega

The Vega measures the effect on an options theoretical value as a result of a change in volatility. Some books refer to this measure as the Kappa, Omega, Zeta, or Sigma Prime (Sigma being the commonly used notation for volatility). Since all options gain value with rising volatility, the Vega for calls and puts is always a positive number. The Vega of all options decreases as time to expiration grows shorter, so a long term option will always be more sensitive to a change in volatility than a short term option with the same exercise price. At-the-money options always have a greater Vega than either in-the-money or out-of-the-money options with the same amount of time to expiration. Out-of-the-money options have the greatest Vega as a percent of their theoretical value.

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