Vega Explained: What is it & How to Trade it

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Vega Explained: What is it & How to Trade it

Рет қаралды 59,640

Күн бұрын

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Пікірлер: 33

@pskale 6 жыл бұрын

While theory says that a Calendar Spread should benefit from an increase in IV, what I have frequently seen happening in the market is the opposite. The IV of the near options increases FASTER than the IV of the far options. Can you do a study on this?

@tastyliveshow 6 жыл бұрын

It can certainly happen, but it is more probable in markets that are futures based like volatility and commodities. When contango curves move into backwardation, that is when near term contracts/IV would be higher than the further term. Here is a segment on this that may be helpful: www.google.com/url?q=tastytrade.com/tt/shows/closing-the-gap-futures-edition/episodes/contango-and-backwardation-07-31-2015%3Flocale%3Den-US&sa=U&ved=0ahUKEwjuwdLt8MjYAhWJy4MKHcctCKUQFggIMAE&client=internal-uds-cse&cx=015477303216471237373:u_cnlyqjhzi&usg=AOvVaw3pVwXTFB4_KQidaQrXWV71

@TheThilaksuresh 2 жыл бұрын

VERY VERY NICE....

@futuredii4962 3 жыл бұрын

am getting points from him what a clarity explanition thank mike

@guyredares 2 жыл бұрын

there is a debate in the industry about whether the Vega as shown by the planform is correct, apparently the real value is much lower

@lucal.1487 4 жыл бұрын

Could you please explain what‘s actually the y-axis representing in all these Bell curves? Is this the overall option Value or only the extrinsic value?

@tastyliveshow 4 жыл бұрын

JUST vega # in this case - sorry for any confusion. Vega and extrinsic value have a positive correlation though, in the sense that vega and extrinsic value are both highest in ATM options, so this bell curve could represent extrinsic value just the same.

@ricomajestic 4 жыл бұрын

Great video like always! So how do we best determine if the vega for a particular option position is too high or low? It is all relative - a vega of +10 maybe fine for one position but horrible for another. I am trying to reduce the sensitivity of my option positions to implied volatility and I'm just wondering what's the best way to do it.

@tastyliveshow 4 жыл бұрын

Longer term options have a stronger vega NUMBER, but their expirations tend to experience lower (mild ) IV changes since the premium is more time based. Near term expirations are more (mild) IV sensitive since there's not much time left until expiration, so if I was trying to reduce vega sensitivity then I would explore longer term expirations that have a lot more time premium and lower price volatility in general. If IV explodes like what happened in March, further dated expirations would explode too, and even if short term expirations exploded, they'd still decay since extrinsic value must be zero at expiration, so it would be much more temporary.

@martynasla7604 3 жыл бұрын

Hi. Thanks as always for valuable content. Just a question, how do you track current IV for specific stock, does tastyworks have 1day change instead of 5? Let's say Apple IV just increased by 1% in the last 5mins and I want to sell a strangle. How would I track this fast its increase. Hope you understand what I mean. I wish I could see or get alerts on IV change to certain %

@dougedd 7 жыл бұрын

Hey i noticed that with LEAP options their Vega is not affected by Volatility Increases the same way as short term options- can you do video on that?

@tastyliveshow 7 жыл бұрын

I will see what I can do! Thanks for the idea!

@hatimaboulouyoune8877 6 жыл бұрын

What do you think of an argument that said : the shape of the vega as a function of S(t) is peaky in the area where S(t)=K, because if the spot price changes from K to k+e or k-e this does change the price of the option widly compared to a change in the area of deep in the money or deep out of the money, and so the change in the implied volatility is greater in the area at the money ( I m not really quit sure about this argument , if you could agree or disagree and hint it )

@Monitor2023 6 ай бұрын

*GREAT episode !!!!*

@shivuprasad783 7 жыл бұрын

Can you explain vega effect on expiration days or near to expiration

@tastyliveshow 7 жыл бұрын

It will be lower - vega is the rate of change of an option's extrinsic value based on changes in volatility. If we are close to expiration, there's not going to be much extrinsic value at all, so even if there is a big change in implied volatility, it won't affect the extrinsic value of the option much if it barely exists in the first place due to lack of days to expiration.

@Goddddsds 4 жыл бұрын

@@tastyliveshow so if we are selling an option on expiry day, we just have one enemy that's delta and one friend that's theta, so should I look at only these two and choose a trade based on highest theta to delta ratio??

@vfxhouse6499 4 жыл бұрын

on tastyworks app or computer app where exactly is this IV that effects VEGA. Is it somewhere in the actual option chain (where it's different for every strike) or is the IV for the underlying stock listed somehwere.

@tastyliveshow 4 жыл бұрын

The IV% is listed on the right side of the trade page on both the app and desktop app. It is the IV% next to the + - expected move.