�#>SB�e��� ��k����(�d���vn�fW|*�&O�3�u���l?�|����q��Zu�b�gxL�#qg4,+�#��IJ��x�������ēLV����cۊf��G2������ ��10�������|���Q�t!ϻ�:%Q�CES&��7�%�����oLůEo�����Kߣ�Nn*��t�-p�����"�䨔ֵGj�x\ �nhc���^Wʔ !a��:9t��s�f�,[�Ҿ�p��6,G�Qp��c e�?�>�$�!���"�EϾ�Te)���]��:��C�N�f;�0|�I aR'��P�)Y;��/^�o�jq"-��2��z\��ҏi�����)�g�h�7��9�X�&S^mS��+�䔆��:͖#xt�GJ}'�h��� grW²�"K6Gs����PF���G���� L��`� ��8� Vega changes when there are large price movements (increased volatility) in the underlying asset, and falls as the option approaches expiration. << <<

<< Vega. >> 1 << /PageMode /UseOutlines 5 0 obj /Length2 8267 It is identical for both call and put options. 2 0 obj Vega is the sensitivity of an option's price to changes in the volatility of its underlying. << >> /Pages 2 0 R /CharSet (/ff/fi/fl/dollar/percent/quoteright/parenleft/parenright/comma/hyphen/period/slash/zero/one/two/three/four/five/six/seven/eight/nine/colon/semicolon/question/A/B/C/D/E/F/H/I/K/M/O/S/T/U/V/W/X/a/b/c/d/e/f/g/h/i/k/l/m/n/o/p/q/r/s/t/u/v/w/x/y/z) /Flags 4 /Nums [ 0 << /Type /PageLabel >> ]
<< Implied volatility is calculated using an If the implied volatility increases to 31%, then the option's bid price and ask price should increase to $1.75 and $1.80, respectively (1 x $0.25 added to bid-ask spread). The call options are offering a competitive spread: the spread is smaller than the vega. endobj x��eX��ڰ�i�P�S��Sj`��;�$$��K����.i����w|������}���?��Z�u��Z�Zs4�Z��P�,�����)�R���� p�q`20H�@�.`(D��$��H�Z����B��B� )��'lm�`�b�3� � �������� ��hnЂ� O6���=@��� M�3��d���X��. ��Ĕ�0�� �V���~�,H�s��x��d̙�^8���tȳ�;�Է�>���d��l�"��Z���?�>������Ƴ�q.$��&�Eu����b��'��� e����� �o`�_�B�9Z�H,����v�ݚf$�,cr��+J�~׾�� ���מ����j ?�|ʀ�.�GK?p���Zc! The option costs $4.21 and its vega is 0.10. /Differences [ 0 /.notdef 11 /ff /fi /fl 14 /.notdef 36 /dollar /percent 38 /.notdef 39 /quoteright /parenleft /parenright 42 /.notdef 44 /comma /hyphen /period /slash /zero /one /two /three /four /five /six /seven /eight /nine /colon /semicolon 60 /.notdef 63 /question 64 /.notdef 65 /A /B /C /D /E /F 71 /.notdef 72 /H /I 74 /.notdef 75 /K 76 /.notdef 77 /M 78 /.notdef 79 /O 80 /.notdef 83 /S /T /U /V /W /X 89 /.notdef 97 /a /b /c /d /e /f /g /h /i 106 /.notdef 107 /k /l /m /n /o /p /q /r /s /t /u /v /w /x /y /z 123 /.notdef ] /Count 21 /Type /Encoding /St 1 <<

Increased volatility makes option prices move expensive, while decreasing volatility makes options drop in price.

/LastChar 122 Assume the current volatility is 40%.

>> �5����Hb��+l����!7�.`�K2���P��'�d�ɮ /OpenAction 169 0 R /Subtype /Type1 stream /Contents [ 20 0 R 21 0 R ] Volatility measures the amount and speed at which price moves up and down, and can be based on recent changes in price, historical price changes, and expected price moves in a trading instrument. /Length 9271 /Filter /FlateDecode

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Ultima is the rate at which the vomma of an option will react to volatility in the underlying market. /Names 145 0 R /ProcSet [ /PDF /Text ] Vega also lets us know how much the price of the option could swing based on changes in the underlying asset's volatility. /Encoding 6 0 R /ItalicAngle 0 Vega Example For example, consider a 3-month call option with strike price $50 on a stock currently at $50. 1 0 obj ]��ޯ��O_�nf�u��;�7�e�An\����%��U!��"�l}���4����q��/��Ͻp�W��'x5�{�W��'x�{������ὐ�'���� ^V����� ^A��9��&�sZ���=�����Z���9�� n��7�/��WC>fqO����W��$��]�����j� �6n��pp�%� ����5�~��!�}�p ��g� \� ��\�5��r}�p+��rp��Vn�� �V^����$%�ެ|� V.��7��W����]a�s��ׇ���[��w*�b�LB��!�ɵaE~2�#�(�%���T���5cO�E��ا��|��UI�c�u�uj�ߔ�o�|4e��R&n����S�(���x�9Ҟ��}�?��ET]�/zg��-�k'[�IZ{m���ȭ�--��__6�^'M�����yw�w�����~����/~A�\ �rѳn�ωc ��C��h5�?�7kz��|p��~q} ��Xw@Y�J~R%)��/ͤ?��tQ)���}���Ү�z�S�45$&��+����N��M�^[��z׷���)����vx���k���Tb�%��5�qS����w��5:�ᘼ�w��g:qk>Y�^�9�4D�9���S��e� ��^�C�=bm��ij�F�}�0������.hy�� ���\&%��ʢ2�]Q�C��˹`l�N��;���ӯ�Rv���j�9۩�dP�e���eǺ-����