Vega , No not the Chevy Vega!

The least talked-about Greek is "Vega." But with volatility rampant, Vega holds the key! Simply said, Vega is an estimate of how much the theoretical value of an option changes price when implied volatility changes by +/-1%. Higher implied volatility would mean higher option prices. That is acceptable because with higher volatility comes greater price swings in the stock price. Positive Vega means that the value of an option position increases when implied volatility increases, and decreases when implied volatility decreases. Negative Vega is just the opposite; the value of an option position decreases when implied volatility increases, and increases when implied volatility decreases. continued

by thinkorswim |  03/06/09  |  Stocks: USO,