Definition
Vega-Positive vs Vega-Negative
A vega-positive position gains when implied volatility rises, while a vega-negative position gains when volatility falls.
Option buyers are vega-positive — they benefit when India VIX and implied volatility climb, inflating premiums — so long straddles profit from a volatility spike. Option sellers are vega-negative, profiting when volatility falls and the IV crush deflates premiums after an event.
Indian traders manage net vega around known events: going vega-positive before an expected volatility expansion and vega-negative to harvest the crush afterward. Knowing your book's vega is as important as knowing its delta when trading Nifty and Bank Nifty options around results, the Budget, or RBI policy.
Related terms
- VegaVega measures how much an option's premium changes when implied volatility rises or falls by 1%.
- IV CrushIV crush is the sudden collapse in implied volatility — and option premiums — right after a major event passes.
- Implied VolatilityImplied volatility (IV) is the market's forward-looking estimate of how much a stock or index will swing, backed out from current option prices and expressed as an annualised percentage.
- India VIXIndia VIX is the NSE's volatility index, measuring the market's expectation of Nifty volatility over the next 30 days — popularly called the 'fear gauge' because it spikes when investors turn anxious.
Plain-English explainer from Investdesk Investors Encyclopedia. General information, not financial advice.