Vega

How to read the number

Vega measures how much a contract's price changes for each percentage point that Implied Volatility (Implied Volatility) moves. A Vega of 0.10 means that Implied Volatility rising from 30% to 31% lifts the contract price by about $0.10, and the reverse when it falls. Vega is higher in long-dated and at-the-money contracts.

Why this number matters

An option's price does not move with the stock alone, but with changes in the market's expectation of movement. The stock can rise your way and your contract can still lose if Implied Volatility collapses, which happens often after earnings. Vega measures your exposure to this second dimension of price.

Volatility Crush

Before known events (earnings, rate decisions) Implied Volatility swells, so contract prices rise, and after the event it drops all at once. Traders call this Volatility Crush (IV Crush). A contract with high Vega loses more from this crush than it gains from a modest move in its direction.

Hypothetical example

A contract costs $3.00 with Vega 0.12 and Implied Volatility 45% before earnings. The report comes out and volatility drops to 30%. The Vega effect alone is about $−1.80 (15 points × $0.12). The stock's move has to make up this drop before any profit starts.

Common mistake

Buying short-dated contracts just before a well-known event, then being surprised by a loss even though the direction was right. The move was already priced into high Implied Volatility, and it collapsed after the event.

Where to see it on the platform

The options calculator shows Vega for each contract, and the Volatility Risk Premium (VRP) in the macro tools compares implied with realized volatility, showing when buying volatility is expensive or cheap.