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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.

But can we conclude that A has higher IV than B also?

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Simply put, no. Vega depends on a variety of factors (including the level/price of the underlying asset). However, vomma/volga/vega convexity (whatever you want to call dVega/dIV) is always positive. So as IV increases, the vega of an option increases - I think this might have been what you were getting at.

It's important to understand that IV is an input to a pricing model while the greeks are the sensitivity of options prices to various input factors (as @vonjd correctly states).

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  • $\begingroup$ "So as IV increases, the vega of an option increases"...yes this was my question. Thank you $\endgroup$ – Victor123 Feb 26 '15 at 17:41
  • $\begingroup$ Why is vega convexity (=vol gamma = volga) always positive? $\endgroup$ – AFK Feb 27 '15 at 19:28
  • $\begingroup$ dVega/dIV is NOT always positive! In particular, for an at-the-money option it is slightly negative. $\endgroup$ – q.t.f. Mar 20 '15 at 15:13
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IV is one of the inputs for your option pricing model, vega measures the actual impact (e.g. in Dollars, Euros...) of any change in IV.

Intuitively IV is the price of the option while vega is the sensitivity to IV.

Bottom line: There is a clear distinction!

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