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Options Strategies & Greeks ยท Lesson 2

Theta and vega

Time and volatility in an option's price

Professional - Gold & Platinum

Theta and vega

In this lesson

Understand time decay (theta) and volatility sensitivity (vega), and who benefits from each.

Key takeaways

  • Theta = value lost per day from time decay; it accelerates near expiry.
  • Vega = price change per 1-point change in implied volatility.
  • Buyers are long vega and short theta; sellers are short vega and long theta.
  • Volatility crush after events can make a correct direction trade lose money.
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