# Vanna—An Explanation of the Options Greek

## A Definition of Vanna and How to Use It

Options "Greeks" are used collectively to determine how closely an options contract will track its underlying market. Vanna is one of these Greeks.

Specifically, Vanna is the rate at which the delta (Δ) of an option will change in relation to alterations in the volatility of its underlying market. Vanna is also the rate at which the vega (v) of an options contract will change in relation to changes in the price of its underlying market.

It's a second-order derivative and it's useful when a trader is making a delta- or vega-hedged trade.

As a bit of background, delta measures how much an option moves relative to the underlying asset price. Vega measures the impact volatility that alterations in the underlying asset have an option.

### Vanna Calculation

Vanna is the second derivative of the value of an options or warrants contract with respect to the price and the volatility of the underlying market. Vanna's primary function is to assess the relationship between the first order Greeks of delta and vega. In other words, it looks at the joint relationship of changes in both volatility and the underlying asset price.