/biz/ - Business & Finance

What makes the forest dark? They can't answer a simple question.

Vomma Hurricane.

>>50910051
>Vomma: Vomma measures how Vega is going to change with respect to implied volatility and it is normally expressed in order to quantify the influence on vega should the volatility oscillate by 1 point. The fluctuations of vomma with respect to S are shown in the next chart: [pic related]

>As displayed in the above reported chart out-of-the-money options have the highest vomma, while at-the-money options have a low vomma which means that vega remains almost constant with respect to volatility. The shape of vomma is something that every options trader should bear in mind while trading because it clearly confirms that the vega that will be influenced the most by a change in volatility will be the one of OTM options while the relationship with ATM options will be almost constant. This makes sense because a change in implied volatility would increase the probability of an OTM options to expire in-the-money and this is precisely why vomma is the highest around the OTM area.