Theta and vega

Time and volatility in an option's price

Professional - Gold & Platinum

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.

Watch this lesson with Tessa. The full video, worked example, calculator, quiz and Ask Tessa are part of Money Globe X Gold and Platinum. Create your account to start learning.

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Educational information only - not financial advice.

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