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Derivatives




Short Vega


A position in options (vega) in which any decrease in the implied volatility of the underlying asset will generate a profit, even without a move in the underlying asset. For example, in a short calendar, the position is short vega when an investor shorts farther out options and long front month options. Therefore, as implied volatility moves down, the position makes money and as volatility decreases, it loses money, all else being the same.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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