Sunday 1 Feb 2026 was Budget Day, and NSE held a special session. Nifty closed at 24,825.45 and India VIX at 15.10. The 25,000 call for the 24 Feb expiry settled at Rs 302.35 a unit. On Monday 2 Feb Nifty closed at 25,088.40, up 1.06%, and VIX fell to 13.87. The call settled at Rs 406.25, a gain of Rs 103.90. Delta alone predicted Rs 127.87. The missing money went to volatility. That is vega, and for a buyer it is the cost of the day after the news.
3By the end you can
- Read vega as rupees per volatility point, per unit and per lot.
- Compare vega and volatility moves across weekly and monthly expiries.
- Split a one day change in an option price into delta, gamma, vega and theta.
The idea, plainly
Vega is how much an option gains when implied volatility rises by one point, for example from fifteen to sixteen percent. It is a price in disguise. Implied volatility is what the market pays for the chance of movement, and vega converts a change in it to rupees. A bought call or put has positive vega, a sold one negative vega, and a call and a put at one strike and volatility have the same vega.
Read one more paragraph, 45 words
Why should a buyer gain when volatility rises? A buyer's loss is capped at the premium while the gain is open ended, so a wider spread of outcomes is worth more to the buyer. A seller faces the mirror image: more movement is more risk.
How vega scales with time
The formula has the same pieces as gamma (module I09), with one new factor.
Vega = DF * F * phi(d1)
* sqrt(T) / 100
The new piece is sqrt(T) on top: more time, more vega. The bell curve phi(d1) is largest at the money, so vega peaks there too. Gamma rises as time runs out and vega falls, so they pull in opposite directions.
Vega is a hump at the strike, and the more time left, the taller it stands
Weekly against monthly
That makes weekly and monthly expiries different animals. At the money on 10 Jun 2026, the option with 48 days left carried Rs 2,180 of vega a lot. On 29 Jun 2026 the option with one day left carried Rs 323. Time was 48 times longer and vega 6.8 times larger, close to the square root rule. The NSE option chain has no vega column. It shows the implied volatility of each strike, and vega is worked out from it, as the Greeks calculator below does. But vega is only half the exposure. You also need to know how far implied volatility itself moves, and that differs by expiry.
Worked example: Budget weekend, 1 to 2 Feb 2026
The same four at the money calls, priced on both days. At the money means nearest the parity forward for the weekly expiries and nearest the future for the monthlies. The implied volatility is the at the money value of each chain. The last column is vega times the volatility move, for one lot of 65 units.
| Expiry | Vega, 1 lot | IV, 1 to 2 Feb | Change | Effect, 1 lot |
|---|---|---|---|---|
| 3 Feb, weekly | Rs 476 | 22.0% to 18.0% | −4.0 | −Rs 1,898 |
| 10 Feb, weekly | Rs 1,008 | 16.7% to 14.3% | −2.5 | −Rs 2,488 |
| 24 Feb, monthly | Rs 1,612 | 15.0% to 13.1% | −1.9 | −Rs 3,055 |
| 30 Mar, monthly | Rs 2,545 | 12.7% to 12.3% | −0.4 | −Rs 984 |
2 terms this section turns on
Who lost what
The nearest expiry lost the most volatility, 4.0 points, and the furthest the least, 0.4. But the nearest expiry has the least vega a lot. Multiply the two and the biggest rupee hit sits in the middle, on the 24 Feb option. Front end moves are largest because an event sits inside the few days left, while a month out the same news is spread across more time. The 30 Mar option carries 5.3 times the vega of the 3 Feb option, yet it lost about half as much in rupees, because its volatility barely moved. Nobody can say in advance which expiry will carry the move. That is why I look at both columns before I think about vega exposure. The curve below is the term structure of that Sunday.
On Budget Sunday, volatility was highest at the front and fell toward the later expiries
One option taken apart
Now the 25,000 call for 24 Feb. Each line is a Greek of the Sunday close times how far its input moved: the future rose 288.3 points, from 24,853.5 to 25,141.8, the call's implied volatility fell 1.38 points, from 14.90% to 13.52%, and one day passed.
| Rupees a unit | Source of the change |
|---|---|
| 127.87 | Delta (0.44) times the future's rise |
| 17.61 | Gamma, half gamma times the rise squared |
| −33.91 | Vega (24.57) times the fall in IV |
| −7.92 | Theta, one day |
| 0.25 | Left over, from smaller effects |
| 103.90 | Actual change, 302.35 to 406.25 |
What the table says
Vega took back about a quarter of what delta gave. If the index had risen by the same amount and volatility had held, the call would have gained about Rs 137.56. A buyer who looks only at delta sees an index that rose and a premium that lagged it, and the reply is in this table. One detail matters here. Black 76 runs on the future, so the index move to use is the future's 288.3 points, not the spot move of 263.0 points. The two differ by the change in the basis, and using spot would have left a gap in the table. One way to study any option trade afterwards: write down the change in the future, the change in implied volatility and the days passed, and the four lines will explain nearly all of the move. The rise in volatility into the event, and its fall after, are the subject of module I16.
Position vega: what it asks of the seller
Vega of a whole position is the sum of its legs with signs (module I12). Someone short a straddle is short vega, so a rise in implied volatility into an event costs money before the index has moved at all. A trader who is short two expiries is short vega in both, and the two parts do not move together, as the table above shows. I describe this as a risk to be understood, and I do not suggest the position.
India VIX: what a high reading means
India VIX is NSE's reading of the volatility that near and next month Nifty options imply for the next 30 days, as a yearly percentage (module F24). Divide it by about 15.9, the square root of 252 trading days, to get a one trading day move: a VIX of 20 prices roughly 1.3% a day, against 0.77% at the median of the series below. So a high VIX means options are dear and movement is expected, not that it will fall. A one point move in VIX is not a one point move in your option's volatility: the nearer the expiry, the more its volatility moved on Budget weekend, as the table shows. For a buyer the price is higher and vega bites harder if volatility settles. For a seller, the premium is higher and so is the cost of being wrong.
India VIX had a median of 12.2, and the 20 in the question sat far above it
The common mistake
The claim: India VIX above 20 means a crash is coming.
VIX measures the price of movement, not its direction. It closed at 27.89 on 30 Mar 2026, its highest in the series, with Nifty at 22,331.40. Nine days later, on 8 Apr, VIX was 19.70 and Nifty 23,997.35, a gain of 7.5%. A high VIX tells you options are expensive and moves are being priced. It does not tell you which way they go. The median of the series was 12.2. One case is not a rule, but one case is enough to break the claim. Two short answers have their own pages: Is India VIX above 20 dangerous? and What is vega?
Key takeaways
- Vega is the rupees an option gains for one point of implied volatility.
- Vega grows with the square root of the time left.
- One day left had vega 6.8 times smaller than 48 days left.
- Implied volatility of nearer expiries moved more on Budget weekend.
- Delta, gamma, vega and theta explained nearly all of the one day change.
- India VIX is the price of movement, not its direction.
Two terms to hold on to from 14.12
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study