Vega can also be used to calculate how much a specific futures,
commodities and options trading price will change with a movement
in implied volatility. You simply count how many volatility
ticks implied volatility has moved.
Multiply that number times the vega and either add it (if volatility
increased) to the options present value or subtract it (if
volatility decreased) from the futures, commodities and options
value to obtain the new futures, commodities and options
trading value under the new volatility assumption. The calculation
works on individual options and can be used to calculate the
value of the time spread.
Now, lets apply the concepts of vega to the Time Spread.
When you apply the vega concept to time spreads, you observe
that as implied volatility increases, the value of the time
spread increases. This is because the out-month option, with
the higher vega will increase more than the closer month option
with the lower vega. That widens or increases the spread.