Two traders hold the same spread, implied volatility jumps five points, and one makes money while the other loses. This lesson shows how to read vega, add it up across a position, and choose strategies by it.
After this lesson you can
- Read vega as dollars per point of implied volatility
- Add up vega across the legs of any position
- Spot when a spread's volatility exposure flips sign
- Recheck deltas and size after big moves in implied volatility
- Tell time value from volatility value and choose strategies by vega, and avoid the five mistakes
Chapters
- 0:00Same spread, opposite results
- 0:59Vega, one option
- 2:08Where vega is big
- 3:14Adding it up
- 4:43Why the spread flips
- 5:53Volatility moves delta
- 7:13Time value, or volatility value
- 8:22When price and volatility move together
- 9:39Choosing by vega
- 10:56Five mistakes
- 11:47The whole lesson on one screen