TL;DR
IV is the market's guess at how much a stock will move, baked into option prices — quoted as a percentage, e.g. 30%. Vega is how much an option's price changes when that guess shifts by 1%. High IV means richer premium for sellers; rising IV means pain for sellers and gains for buyers.
The other three Greeks — delta, gamma, theta — describe how an option reacts to price and time. IV and vega are the pair that describes how it reacts to uncertainty. They're the most misunderstood Greeks because they're measuring something the market is forecasting, not something physically happening — and the forecast moves on its own, independent of price.
IV is a prediction with a dollar value
Implied volatility is the volatility number that, plugged into the options pricing model, produces the price the market is actually paying. It's a backed-out estimate, not a measurement. A 30% IV on NVDA means the market is pricing options as if NVDA will have a 30% annualized standard deviation of returns over the option's lifetime.
The number drifts on its own. IV expands ahead of earnings (the market knows a surprise is coming), then collapses the moment the surprise is resolved — the famous “IV crush.” IV spikes in a panic and mean-reverts in a calm market. None of that requires the stock to move; the option price moves because the forecast did.
Vega is what that move costs (or pays)
Vega is the Greek that measures IV sensitivity. An option with a vega of $0.23 gains $0.23 in value if IV rises by 1 percentage point and nothing else changes — same magnitude lost if IV falls. Vega is positive for the buyer (rising IV is good) and negative for the seller (rising IV is bad).
Vega is largest for at-the-money options and for longer-dated options — both because there's more uncertainty about where the stock will end up at expiry. A 7-day deep-OTM call barely cares about IV; a 90-day at-the-money call cares enormously.
How it shows up on a Runir page
Every row on the Premium board is partly an IV play. High IV means the contract you'd sell is paying richer premium — better annualized yield, all else equal. The canonical wheel-seller move is to enter rich (high IV), then ride the mean-reversion as IV cools off and the option decays from both theta AND vega at once.
The Unusual Activity board is the other side of the same coin: unusual volume often precedes (or follows) an IV spike. A name showing up on /unusual with a vol-to-OI of 5× is the market re-pricing risk in realtime — vega telling the story while delta and gamma are still working things out.
Across the Runir set, IV is the signal we use most heavily for timing: when it's low everywhere, premium-selling is a thin living and we say so; when it spikes (vol-event regimes), the Premium board fills with rows that would be unwriteable a week earlier. The board hasn't gotten smarter — the environment has just paid for the same patience.
What it doesn't tell you
IV is a market guess, not a measurement of past behavior. Realized volatility — what the stock actually did — is the scoreboard. Selling rich IV is profitable on average because realized vol is usually less than implied vol (that's the volatility risk premium). But on the days realized blows past implied — earnings shocks, surprise news, macro events — the seller pays the bill all at once.
Vega is also a local picture. The same option that has a $0.23 vega at IV 30% has a different vega at IV 60%; and vega itself decays toward expiry (a tomorrow-expiring option barely cares about IV because there's no uncertainty left to price). Use vega for what it is — a current snapshot — not as a future commitment.
What to do with this
Read theta if you skipped ahead — theta and vega together are most of what the wheel-seller cares about, and both decay in the seller's favor most of the time. Then open today's Premium board to see which rows are paying rich (high IV, high annualized yield) and which are paying thin.
Common questions
- What is implied volatility (IV)?
- The market's estimate of how much a stock will move, backed out of option prices and quoted as an annualized percentage. It expands before known events like earnings and collapses once they resolve — the 'IV crush.'
- What is vega?
- How much an option's price changes when implied volatility moves one percentage point. Vega is positive for the buyer (rising IV helps) and negative for the seller, and it is largest for at-the-money and longer-dated options.
