Brian Lee
Aug 12, 2025
Part of: Option
Greeks
Option vega gauges how sensitive an option’s price is to changes in implied volatility. It estimates how much the premium should move for a one percentage point shift in volatility. Both calls and puts generally have positive vega, meaning higher volatility pushes option prices higher. Mathematically, vega is the partial derivative of the option price (V) with respect to volatility ():
\[ \nu = \frac{\partial V}{\partial \sigma} \]
Vega is largest for at-the-money contracts with plenty of time until expiration. As options move deep in- or out-of-the-money, or as expiration nears, vega shrinks. Monitoring vega alongside measures like volatility helps traders judge whether premiums are rich or cheap relative to expected market turbulence.