Option Vega Explained: Volatility Points vs. Percent Changes
Summary
Hollow Point Trading shares a video explaining why a volatility percentage point differs from a one-percent relative change. Using implied volatility rising from 20% to 21% and a quoted vega of $0.10 per share per point, it clarifies how volatility changes affect an option’s value.
https://youtu.be/zAqbPp-U8y8
Vega: a volatility percentage point is not a one-percent relative c...
A volatility percentage point is different from a one percent relative change. In a hypothetical option, implied volatility moves from twenty percent to twenty one percent. That is one percentage point, but a five percent relative increase in the volatility number. Suppose quoted vega is ten cents per share for each volatility percentage point. ...
