Vega (ν)
Your volatility exposure — how much you make or lose when the market re-prices risk.
The change in an option’s price for a 1% change in implied volatility (IV).
Overview
Vega measures sensitivity to implied volatility — the market’s expectation of future movement baked into option prices. When IV rises, option premiums inflate; when IV falls, they deflate, independent of where the underlying actually goes.
Option buyers are long vega — they benefit from rising IV. Option sellers are short vega — they benefit from falling IV. Vega is largest for at-the-money options and for longer-dated options, which have more time for volatility to matter.
Because vega and price both feed off implied volatility, events that spike IV (results, budgets, elections) and the “IV crush” that follows are among the most important — and most misunderstood — forces in options trading.
A plain-language example
You are long a NIFTY 24,000 straddle with vega +60.
Ahead of a big event, implied volatility jumps 3 points: your position gains roughly ₹180 (3 × ₹60) even if NIFTY has not moved at all.
The moment the event passes, IV collapses back 3 points — the “IV crush” — and that same ₹180 evaporates. Many event trades lose because vega worked against them after the news, despite a correct directional call.
Always ≥ 0 per long option · Largest at-the-money and for longer expiries · Small for near-dated deep ITM/OTM options.
Buyers vs sellers
If you buy the option
Buying options is long vega — you profit if implied volatility rises.
If you sell the option
Selling options is short vega — you profit if implied volatility falls.
What moves Vega
| When… | Effect on Vega |
|---|---|
| More time to expiry | Vega grows — volatility has more time to influence value |
| Option at-the-money | Vega peaks — most sensitive to IV here |
| Approaching expiry | Vega shrinks toward 0 — little time left for vol to matter |
| Post-event IV crush | IV drops sharply, hurting long-vega and helping short-vega books |
Vega at a glance
How traders use it
- Buy options (long vega) when IV is cheap and you expect it to rise; sell options (short vega) when IV is rich and you expect it to fall.
- Around scheduled events, IV is elevated in advance and crushes afterward — a headwind for naked long buyers and a tailwind for defined-risk sellers.
- Calendar spreads are a pure-ish vega/term-structure play: long a far-dated (high-vega) option, short a near-dated (low-vega) one.
Watch out for
- Being right on direction but wrong on volatility can still lose money — IV crush after an event is the classic example.
- Vega risk compounds across legs: a multi-leg book can carry large net vega even when it looks delta-neutral.
See Vega on a live position
Open the Strategy Builder, add a leg, and hover the Vega row in the Greeks tab to watch it update in real time.
Educational content only — not investment advice. All values are illustrative and do not reflect live quotes. Options carry significant risk; consult a registered adviser before trading.