The Option Trading Website
| |||||
> Home
> Options 101
> Option Vega υ
 Option Vega υ
Issued on December 01 2011 par Strategies Options
It's the sensitivity of an option price to Implied Volatility varaitions.
I - Definition
Option Vega υ is defined as the rate of change of an option price due to implied volatility changes. Note that it's not a Greek letter at all ! II - How to derive it If one set V(σ) as option value for volatility σ σ(1) and σ(2) two different volatilities Vega can be written as υ = [ V(σ1) - V(σ2) ] / (σ(1) - σ(2)) If an option (call or put) is worth 12.37 with an implied volatility set to 31% and the same option is worth 12.765 if implied volatility is 32%, Vega is then : υ = ( 12.765 - 12.37 ) / ( 0.32 - 0.31 ) = 0.395 / 0.01 = 39.5 Because volatility is often grasped in % one needs to divide the result by 100. That is υ = 39.5 / 100 = 0.395 As far as one take a look at small moves for volatility, it's usual to write Vega as : υ = ( ∂V/∂σ ) / 100 That is the first partial derivative of option price with respect to implied volatility. III - Graph  Next : Option Theta θ : A First Attempt Previous : Option Vega υ : A First Attempt OPTIONS 101 - INDEX OPTIONS 101 - CHAPTER I OPTIONS 101 - CHAPTER II OPTIONS 101 - CHAPTER III OPTIONS 101 - CHAPTER IV OPTIONS 101 - CHAPTER V OPTIONS 101 - CHAPTER VI Strategies Options |
Other articles
- Options 101 -
Option Vega υ : A first attempt
Implied volatility in the Black & Scholes option pricing model is supposed to be constant. It's far from reality.
- Basic Strategies -
The call spread : A first attempt
Long call spread is a simple strategy which combines the purchase and the sale of two calls.
- Advanced Strategies -
Calendar spread : A first approach
The calendar spread is probably one of the most interesting strategies with vanilla options.
- Currency Options Trading Strategies -
€/USD put spread MAR 1.40/1.36 Strategy Summary
Summary and results for a Put Spread on EUR / USD.
- Other Derivatives -
Stability Warrants : A First Attempt
Stability Warrants are listed double knock out options issued by banks
- Advanced Strategies -
Calendar spread : the delta ∆
The calendar spread is an (almost) symmetric strategy. It thus has to be translated in the delta ∆.
|
Strategies-Options.com - © 2009 - 2012 Tous Droits réservés
|
|
|
|
|
|
|
|
| www.strategies-options.com est un site d'éducation et de formation sur les marchés dérivés, en particulier les options, les options binaires, les warrants, les turbo warrants et les certificats.
Même si nous faisons notre maximum pour produire du contenu de qualité, nous vous remercions de nous contacter si vous remarquiez une erreur afin que nous puissions la corriger le plus rapidement possible. Les stratégies présentées ne sont en aucun cas des conseils en investissements, mais elles servent à illustrer notre propos dans un but strictement éducatif. Elles sont basées sur notre expérience de ces marchés. Vous êtes responsables de l'utilisation de ces stratégies dans l''éventualité où vous souhaiteriez les reproduire. Il reste strictement interdit de diffuser, reproduire ou publier de quelque manière que ce soit tout ou partie du contenu du site www.strategies-options.com, sous quelque forme rédactionnelle, graphique ou d'image, que ce soit, sans notre consentement. |
 |