A sharp fall in implied volatility after an event, which reduces the value of long options.

Which strategies are long vega?

Long calls, long puts, straddles and strangles gain when implied volatility rises.

Options WhaleEarnings volatility research

Concept guide

Options Vega

Vega estimates how much an option's price changes for a one-point change in implied volatility.

Concept

What vega measures

Vega is largest for at-the-money options with more time to expiration. Long options are long vega and short-premium strategies are short vega.

Why event trades hinge on vega

Implied volatility often rises into an event and falls afterward. A position can lose money purely from that volatility drop even if the underlying moves as expected.

FAQ

What is an IV crush?: A sharp fall in implied volatility after an event, which reduces the value of long options.
Which strategies are long vega?: Long calls, long puts, straddles and strangles gain when implied volatility rises.