768 
TABLE 37-6 
Implied 
Volatility 
20% 
30% 
40% 
50% 
60% 
70% 
80% 
Stock Price = I 00 
Part VI: Measuring and Trading VolatHity 
90-110 Call 
Bull Spread 
(Theoretical Value) 
10.54 
9.97 
9.54 
9.18 
8.87 
8.58 
8.30 
model, using the assumptions stated above, the most important of which is that the 
stock is at 100 in all cases in this table. 
One should be aware that it would probably be difficult to actually trade the 
spread at the theoretical value, due to the bid-asked spread in the options. 
Nevertheless, the impact of implied volatility is clear. 
One can quantify the amount by which an option position will change for each 
percentage point of increase in implied volatility. Recall that this measure is called 
the vega of the option or option position. In a call bull spread, one would subtract the 
vega of the call that is sold from that of the call that is bought in order to arrive at the 
position vega of the call bull spread. Table 37-7 is a reprint of Table 37-6, but now 
including the vega. 
Since these vegas are all negative, they indicate that the spread will shrink in 
value if implied volatility rises and that the spread will expand in value if implied 
TABLE 37-7 
90-110 Call 
Implied Bull Spread Position 
Volatility (Theoretical Value) Vega 
20% 10.54 -0.67 
30% 9.97 -0.48 
40% 9.54 -0.38 
50% 9.18 -0.33 
60% 8.87 -0.30 
70% 8.58 -0.28 
80% 8.30 -0.26