Derivatives · Core
Vega
Vega is the sensitivity of option value to implied volatility — the vol-dollar you are long or short.
Definition
Vega = ∂V/∂σ, usually per 1 vol point. Longer dated and nearer ATM have more vega. A book can be vega-neutral and still be long wings (volga). Implied vol is the quote; vega is how much you care.
Why it matters
Event trades and vol-selling are vega decisions. A right directional call that was short vega into a crush can still lose.
Case
A long straddle into a binary event: you are long vega into the print and then the smile crushes. Directionally right, vega wrong.
How to read it
Vega by tenor and wing. Then compare implied to the realized you actually expect, including the crush.
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