Vomma

Vomma, also known as vol-gamma, measures the second-order sensitivity of an option price to changes in implied volatility. Specifically, it represents the rate of change of vega with respect to changes in implied volatility.

If an option has positive vomma, its vega increases as implied volatility rises, making the option price highly sensitive to volatility changes. This is a key risk for traders who are long volatility, as it means their position becomes more sensitive to further volatility increases.

In crypto, where volatility can jump from low to extremely high in seconds, vomma is a vital risk metric for managing vega exposure. It helps traders understand the non-linear impact of volatility shifts on their portfolios.

Vomma is particularly important for managing portfolios of long-dated options or exotic derivatives where volatility surfaces are not flat. By monitoring vomma, traders can better hedge their volatility exposure and avoid unexpected losses during periods of market turbulence.