“Tunnel Vega” is a well-known metric used in binary options trading. But what exactly does it indicate? How can you use this metric to have even more success in binary options trading? In this article, we want to take a closer look at the details.
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What does Tunnel Vega measure when trading binary options?
Tunnel Vega measures how a change in implied volatility affects the fair value of a binary option. It is also mathematically expressed as the first derivative of the fair value of a binära optioner tunnel.
The mathematical representation of Tunnel Vega is:
Features of the tunnel vega metric
Suppose we select the 1-day vega profile from the soybean chart. In that case, we see that the Vega is slightly different from zero halfway between strikes. This indicates that the probability of the price going down has increased due to the longer time to expiration.
On a 10-day profile, this pattern continues. But we also notice that the absolute value of the Binary Options Tunnel Vegas decreases again. This is because the probability of the price being between strikes is becoming less dependent on the current strike price.
Besides, it is noticeable that from an implied flyktighet of 20% and above, there is not much difference between Vega and other indicators. This can be a possible indication of an even price rise. Keep that in mind for your next binära val handel.
Conclusion – Tunnel Vega is a helpful metric
Yes, Tunnel Vega can be a helpful metric that you can use in binary options trading. However, I always recommend having a closer look not only at the Vega, but also at the Tunnel-Theta, Tunnel-Gamma, and Tunnel-Delta. If you have determined all four values, your chances of making better predictions about market movements increase.
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