Complete Guide to Options Trading - 10. Vega

So far, in the series we've learned about three option greeks—delta, gamma and theta. In this video, we'll discuss vega—the fourth and final greek. One of the factors that you need to consider when taking an options trade is the market volatility. In simple terms, volatility is a measure of how much the markets move up and down. The reason why you need to know about volatility is because it impacts option premiums. When markets are more volatile, premiums are higher and vice versa. So now that you know that volatility increases option premiums, how much do they increase by? This is what vega tells you. The Vega of an option measures the rate of change of option’s value (premium) with every percentage change in volatility. Before you learn more about Vega, it's important that you have an understanding of what volatility is and how it is measured. Check out these chapters to learn more: 1. https://zerodha.com/varsity/chapter/understanding-volatility-part-1/ 2. https://zerodha.com/varsity/chapter/volatility-calculation-historical/ 3. https://zerodha.com/varsity/chapter/volatility-normal-distribution/ 4. https://zerodha.com/varsity/chapter/volatility-applications/ Once you have a working understanding of volatility, you can dive deeper and learn about vega: https://zerodha.com/varsity/chapter/vega/