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ν Vega

The Four That MatterWhat happens if volatility moves?

How much the option's price changes for a one-point move in implied volatility. Selling premium is being short vega — you profit when expected movement is repriced downward.

Where you see it: The Vega (ours) figure in the Assign tooltip and on AI Trader position cards.

What it measures

Vega is sensitivity to implied volatility: how much the contract's price moves if implied volatility shifts by one percentage point. It is not a true Greek letter, which is a piece of trivia that annoys purists and changes nothing about its usefulness.

Vega grows with time to expiry, roughly with the square root of it. A longer-dated option has more room for volatility to matter, so the same IV move reprices it far more. A weekly is barely touched by an IV shift; a six-month contract is substantially repriced by one.

Selling an option is being short vega. If implied volatility rises after you sell, the contract becomes more expensive to buy back and the position moves against you even if the stock has not moved at all. If implied volatility falls, the position gains.

weekly~1 month6 monthstime to expiry, left to right, further outvega
Vega grows with time to expiry: a longer-dated option has more room for volatility to matter, so the same one-point move in implied volatility changes its price more. This is why a weekly is barely moved by an IV shift while a six-month contract is repriced by it — and why a short-dated seller is far less exposed to a volatility spike than a LEAP seller. Shape ∝ √(time), at the money.

How to read it

Position vega reads negative on every short leg, like gamma. A vega of −0.05 means a one-point rise in implied volatility costs about five cents per share against you.

Vega is largest at the money and for longer tenors. A far-out-of-the-money weekly carries almost none.

Book-level short vega is a single-factor exposure: a market-wide volatility spike moves every short position the same direction at once. This is one of the few risks in a premium-selling book that does not diversify away across names.

Using it on the wheel

Short vega is why selling into elevated volatility and holding through its decline is the classic premium-seller setup. High implied volatility means richer credits, and if that volatility subsides the position gains from the repricing on top of the decay.

It is also why an earnings print is treated differently from ordinary days. Implied volatility inflates ahead of a scheduled event and collapses immediately afterwards — the IV crush — which repays a short-volatility position even when the stock barely moves. The corresponding exposure is that the event can also move the stock hard.

This is the mechanism behind the platform's Fear and Greed model: when the VIX is elevated, premium across the board is richer, and both AI Trader books are sized to deploy more into that condition rather than less.

If you sell mostly short-dated contracts, your vega exposure is naturally small — the tenor does the work. The trade-off is that you also collect less credit per contract.
Short vega does not diversify. Twenty short puts across twenty unrelated names are still one bet that market-wide volatility does not spike.
Vega is quoted per one-point move in implied volatility. A move from 40% to 55% is fifteen points, not fifteen percent of the vega figure.

Like everything in this guide, these are descriptions of conditions and reference levels — context for your own decisions, not instructions to trade.

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