Why Option Vega Is So Important
Posted on Thursday, December 9, 2021 at 4:04 PM
Dan Passarelli, CEO - Market Taker Mentoring
All option traders make or lose money based on changes in implied volatility (IV). But IV is an often misunderstood concept. Traders who look at IV and the vega position of their trades end up being more successful traders. This video explains why option vega is so important.
Implied volatility is basically the supply and demand component of option prices. For example if a big trader buys thousands of a certain call, the price will go up, even if the underlying stock does not. That is the effect of implied volatility. Vega measures the effect of this on the price of the individual option.
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