Vega is one of the "Greeks," which are a set of sensitivity measures that help traders understand how options prices are affected by changes in various underlying factors. Vega specifically measures the sensitivity of an option's price to changes in the volatility of the underlying asset.

So, what’s the relationship between volatility and option premium. Let’s get back to the drawing board and understand what high volatility means?

As stock price movement cannot be pre-conceived, the price path taken by the stock could be filled with unpredictable and sometimes sharp moves, also known as price turbulence. A measure of this turbulence/unpredictability is what defines volatility. The erratic moves as discussed, can occur on either side of the current market price, either higher or lower. So, the wider and wilder the fluctuations, the higher, the volatility measure.

This is what defines high volatility. Now, high volatility would actually push a lot of stock portfolio investors to buy options to hedge their risks. At the same time, high volatility is a deterrent for option sellers to immediately sell in the market, even if they do, they would desire higher option premiums to account for that high volatility.

Therefore, the new demand supply dynamics would push up the option premia.