Vanna
The cross-sensitivity of an option's delta to changes in implied volatility (equivalently, the cross-sensitivity of vega to changes in spot). Vanna captures how a position's directional exposure shifts as the vol surface moves and is one of the reasons delta-hedged option positions develop unexpected directional bias during stress regimes. For a lifelong investor, vanna is a reminder that option Greek exposures interact in non-linear ways once second-order effects become material -- particularly during the sharp moves that hedging strategies most need to perform during.
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Related terms
American Option · Asian Option · Barrier Option · Basket Option · Butterfly Spread · Calendar Spread
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