Chapter 40: Advanced Concepts 
FIGURE 40-6. 
Vega comparison, XYZ = 50. 
20 
18 
16 
14 
0 
0 12 ,--
.2S 10 C1l 
Cl 
~ 8 
6 t= 3 months 
4 
2 
0 
40 45 50 
Strike Price 
TABLE 40-6. 
861 
55 60 65 
Vega comparison for different time periods (with XYZ = 50). 
Vega 
Strike Price t = 1 Year t = 6 Months t = 3 Months 
40 0.12 0.06 0.02 
45 0.16 0.11 0.06 
50 0.19 0.13 0.09 
55 0.20 0.13 0.08 
60 0.18 0.11 0.05 
65 0.16 0.07 0.02 
The vega is a positive 10.23 points ($1,023 since each point for these equity 
options is worth $100). The fact that the position has a positive vega means that it is 
exposed to variations in volatility. If volatility decreases, the position will lose money: 
$1,023 for each one percentage point decrease in volatility. However, if volatility 
increases, the position will benefit. 
Vega is greatest for at-the-money options and approaches zero as the option is 
deeply in- or out-of-the-money. Again, this is common sense, since a deep in- or out-