FRM Glossary · Part I · Valuation

Vega (Greek)

The rate of change of an option price with respect to implied volatility — how much an option gains for a 1-point vol move.

In more detail

Vega is positive for long options and negative for short options. Long-dated at-the-money options have the highest vega. Vol traders typically express their view via vega (not delta), and hedge delta with the underlying while leaving vega unhedged to capture volatility moves.