Vega Neutral

See: Vega.

Vega represents a way to measure the relationship between an option’s price and the implied volatility of the option’s underlying asset. It can represent a risk for an investor; changes in the implied volatility could cause the value of their options to fall. To cancel this out, the investor can pursue a vega-neutral strategy...setting a hedge that cancels out an option’s vega.

The result is a situation where no amount of movement in the underlying asset’s implied volatility will impact the value of the investor’s overall position.

Long options have positive vega, while short options have negative values. Therefore, a short position can offset the vega of a long position. So if you own a call for 100 shares of NFLX, you can offset the vega by selling a call for the same underlying asset.

The vega for options are listed in most option trading software, meaning that compiling a vega-neutral strategy simply involves getting the appropriate number of negative-vega positions to offset the positive one you're looking to hedge.