Explain the Greeks: Vega and Theta.

Explain the Greeks: Vega and Theta.

Approach: Define sensitivities to volatility and time.

Vega measures the sensitivity of the option price to changes in the implied volatility of the underlying asset. Theta measures the sensitivity of the option price to the passage of time (time decay).

Follow-up: Is Theta usually positive or negative for long option holders?

Key concepts: implied volatility, time decay.