Why is Vega important?
Vega is important because it will tell you how your position is exposed to changes in volatility. If the Vega is high then your option will rapidly gain or lose value. If you are wrong on the direction of the underlying, then the position can lose value. For instance, you have bought a call thinking that the underlying stock price will increase rapidly, driven by volatility levels that are expected to be higher than what prevails at the time of entering the contract. Then the premium will increase with your Vega and you can square your position at higher premiums. However, the opposite has happened leaving your call worthless. You will sustain losses, which would be the initial payout for buying the option. Long or short: Vega is always positive, but depending upon your position (long or short), it will help you make or lose money. # An option buyer benefits from rising IV, which means that the option premium will go up. Falling IV will make him lose money because the option premium wi
