Vega is a metric used in options pricing, using the symbol of the Greek letter nu ‘ν’, but referred to by the invented name vega. Vega measures the amount that an option’s price contract changes in relation to a 1% change in implied volatility of the underlying asset. Options traders use vega to confirm the impact of volatility on the value of their holdings.
Vega is negative for short options (such as puts or written calls) and positive for long (calls or written puts). Vega typically falls as an option approaches its expiry date. This is because volatility will have less opportunity to impact the price of the option if it is closer to expiry, reducing vega.
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