MrPippen
Banned
- Joined
- Apr 7, 2018
- Messages
- 37,929
- Reaction score
- 5
No worries! Vega is your exposure to implied volatility, a factor which goes into the price of an option. very roughly, it's the market's forecast of how volatile the underlying will be over the life of the option.
Generally, if you're long options, you're long vega: if the market wants to buy options because they think the underlying's going to be more volatile (or they just want protection against sudden moves), then implied volatility goes up, and you make money on your vega exposure. Roughly, if you're long options and long vega, you make money when markets are volatile.
Conversely, if you're short options, you're short vega and you'll generally make money if markets are quiet.
The problem is, right now, implied volatility in EUR and JPY options is the lowest it's been since 2014 - so the market needs to be very quiet for you to make any money off a short-vega position in EURUSD or USDJPY.
Don't really understand, but that is because of my low ability...



