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5
votes
3answers
143 views

Is Complete Vega Elimination Possible?

I avoid short selling in my strategies. Losing more than invested is not attractive. But at times the implied volatility is too high, I am worried about buying at all and I am trying to filter the ...
5
votes
2answers
2k views

VIX = Vega of S&P500 options?

ok, so let assume I can predict the daily change in the VIX itself (in points) every day. what would be the best way to play this with OPTIONS? well, obviously VIX options, but if I can look at the ...
4
votes
2answers
247 views

Does higher vega imply higher IV and vice versa

If an option A has higher vega than option B, does that also mean that A has a higher IV than B? I understand that by definition, a higher vega means that A's price is more sensitive to its IV than B. ...
4
votes
1answer
137 views

Link between Vega and Gamma

"The vega is the integral of the gamma profits ( ie expected gamma rebalancing P/L) over the duration of the option at one volatility minus the same integral at a different volatility...Mathematically,...
4
votes
2answers
222 views

is there an analytical proof that vega-neutral also provides (gamma & theta) neutral?

I've read an answer here that say if your security has vega, then it has gamma and theta. is there an analytical proof that vega-neutral also provides (gamma & theta) neutral?
4
votes
1answer
97 views

Understanding Vega calculation in black Scholes model

I am attempting to calculate the Greeks, and I understand their derivation. However when it comes to actually implementing Vega I am a little lost. Vega is defined analytically as: $$ SN'(d_1)\sqrt{T-...
4
votes
0answers
71 views

Greeks of a Basket Option

I want to estimate delta, vega and gamma for a basket option. This option is a European Call option. The underlying is $S=\omega_1 S_1 +\omega_2 S_2$ Where: $S1$ = stock price of asset 1 $S2$ = ...
3
votes
1answer
285 views

Can a long put trade be profitable through Vega even if the underlying moves upwards?

Generally speaking, I know when implied vol increases, option prices increase for calls. However, does the same occur for puts? If I am expecting implied volatility to increase for an option on an ...
3
votes
2answers
122 views

Vega in a “constant volatility” Black-Scholes world?

A little confused, I consulted the Wilmott forums for guidance on how I can interpret vega/vomma. Another user's post reminded me that the Black-Scholes model assumes that the underlying has constant ...
2
votes
1answer
86 views

Under what circumstances Veta is positive?

In general, as the option moves towards expiry, its vega is decreasing. Are there circumstances where the veta, i.e. the sensitivity of vega with respect to time, is positive, that is when vega is ...
1
vote
1answer
104 views

Why is Vega meaningful only for options which have single-signed gammas

I have been reading Wilmott Frequently Asked Question book and this was mentioned that Vega is not useful when measuring risk for options that have gammas changing signs such as Digital option or ...
1
vote
1answer
114 views

Vega in Heston / Bates Model

Just a question regarding "convention": Is the Vega in Heston / Bates model the sensitivity with regards to $\sqrt v_0$ or a term of $\sqrt v_0$ and $\theta$ (Long term variance)? Regards
1
vote
2answers
321 views

Vega hedging with implied volatility smile

I have a problem with vega hedging. Consider the management of an exotic derivative, such as Barrier option. Typically we do the following tasks: selecting a pricing model, say, a local volatility ...
1
vote
0answers
56 views

Hedge volatility decreases

My particular options positions are typically a long delta, and long vega. Decreases in implied volatility, or specifically the VIX, can drastically alter the profitability of my position. Is there a ...
0
votes
1answer
69 views

Why vega increases further out in time

Why do back months options have a higher vega than front month options? If possible , kindly explain on an intuitive level without a lot of math.
0
votes
1answer
70 views

why Implied Vol (VIX) increase with decrease in Stock Price or vice versa?

why Implied Vol (VIX) increase with decrease in Stock Price or vice versa? whereas Vega is positively related with change in option price to change in stock price.