Vega: This tracks what the market is forecasting as the volatility (in other words, the standard deviation) in the underlying asset in the time until expiration. The higher the volatility in the underlying asset, the more likely the option is expected to become profitable and therefore becomes more expensive. What’s interesting to note is that implied volatility is usually a “plug” number. That is, it is calculated using all the other “greeks” above and the premium of the option in the market to come up with what the market expects the underlying asset’s volatility to be. Of all the “greeks,” this is the one that will come up most. For options traders, they often state an option’s premium by its “implied vols” rather than even its dollar or bitcoin amount since it offers a convenient way to standardize different options on the same underlying asset.

Recent