Vomma (Volga)

What is Vomma (Volga)?

Vomma (Volga) Vomma, also known as volga or vega convexity, is a second-order Greek that measures the rate of change of vega with respect to changes in implied volatility. In other words, vomma tells you how much your vega exposure will change as IV moves. It is the second partial derivative of the option price with respect to implied volatility and captures the convexity of an option's value with respect to volatility changes. How it works: All options have vega, but vega itself is not constant. Vomma quantifies how vega accelerates or decelerates as IV shifts. Options with positive vomma see their vega increase as IV rises and decrease as IV falls. This convexity is valuable because it means the option benefits disproportionately from large volatility moves: the higher IV goes, the faster the option gains value per additional point of IV. At-the-money options have low vomma because their vega is already near its maximum. Out-of-the-money and deep OTM options have high vomma because their vega starts small but increases rapidly as IV rises. For example, consider a deep OTM SPY $440 put (with SPY at $510) that has a vega of $0.05 and a vomma of $0.008. If IV rises from 15% to 25% (a 10-point move), the vega effect alone would add $0.50 to the option price. But vomma adds additional value because vega itself increases as IV rises. At 25% IV, the option's vega might now be $0.13, and any further IV increase benefits the position even more. During the 2020 COVID crash, OTM puts with high vomma saw explosive gains as both delta and vega amplified simultaneously. Vomma is critical for understanding tail-risk hedging and crash protection. Portfolio managers who buy far OTM puts are implicitly buying vomma. The convexity from vomma is what makes cheap OTM puts valuable as crisis hedges: they cost little in calm markets (low vega) but gain vega rapidly during panics (high vomma), creating the asymmetric payoff profile that makes tail-risk hedging viable.