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