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Vomma

The rate at which vega changes as implied volatility changes; it measures how much a position benefits from large volatility moves rather than small ones.

Vega tells you the effect of a one-point change in implied-volatility. Vomma tells you whether that sensitivity itself grows or shrinks as volatility rises. Out-of-the-money options have high positive vomma, which is why they gain disproportionately in a volatility shock.

Positive vomma is convexity in the volatility dimension: you make more on the way up than you lose on the way down. It is the reason far out-of-the-money puts are so persistently expensive in implied-volatility terms, and why selling them is profitable most of the time and catastrophic occasionally.

Example: two XYZ positions both have $500 of vega. The at-the-money straddle is nearly vomma flat. The $40 put has strong positive vomma, so in a jump from 20% to 45% volatility it gains far more than the straddle, even though they started with identical vega.

Related: vega-convexity, second-order-greeks, vanna, volatility-skew

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Payoff of a long straddle at expiryA V shape with its point at the strike and both arms rising through zero as the price moves away.Profit / loss per share08090110120Profit if the move is big enough, in either directionStrike 100Breakeven 92Breakeven 108Max loss 8 — both premiums, if it finishes at 100Underlying price at expiry
Long straddle: payoff at expiry. A 100 call and a 100 put bought together for 8 make a V. A quiet market that ends near 100 costs the whole 8; the position only turns positive once the price finishes below 92 or above 108, whichever way it goes.

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