Options Greeks - Vanna

Vanna is the sixth options greek to be discussed in my series of articles explaining the options greeks. From this point on, the options greeks become a little more obscure. However, if you are making a trade that involves one of the lesser used options greeks (such as a delta hedged position trade), you will need to know about them.

As a trader from Deutsche Bank once said about some of the more obscure options greeks (including vanna):

If you don’t incorporate them into your pricing functions, you’ll enjoy extreme but brief popularity, sell lots of cheap exotic options, and then go spectacularly bust.

Therefore, my explanation of vanna will explain what vanna represents, and how vanna is used to determine how the delta or vega of an options or warrants contract will change as the volatility or price of its underlying market changes, so that you can avoid going "spectacularly bust".