Vega is an important concept in options pricing. In simple terms, it measures the sensitivity of an option’s price to changes in the volatility of the underlying asset. In other words, it tells you how much the price of an option will change for every 1% change in market volatility.

For instance, if an option has a Vega of 0.10, this means its price will increase by ₹0.10 for every 1% increase in volatility, all else being equal. Conversely, if market volatility decreases by 1%, the price of the option will decrease by ₹0.10.

Vega is particularly useful for options traders who lean more towards speculative or hedging strategies, as these traders tend to be more concerned with the price performance of an option, rather than owning the underlying asset itself. By understanding how Vega impacts an option’s price, these traders are better equipped to plan their trades around fluctuations in market volatility.