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Below is a sample of our Charm and Vanna Exposure charts.

What is Vanna?

Vanna measures how much an option’s delta changes as implied volatility (IV) changes. It’s a second-order Greek that peaks for options near the at-the-money (ATM) strike and is particularly significant for out-of-the-money (OTM) options.

Why Should I Care?

Large vanna at a strike price can drive significant hedging flows when volatility shifts. Market makers adjust their delta hedges in response to IV changes, which can stabilize or amplify price movements in the underlying asset.

How Market Makers Hedge (And Why It Moves Prices)

Market makers aim to stay delta-neutral. Vanna positioning determines what action market makers take as implied volatility changes. Their reactions depend on the vanna regime:

• Positive Vanna: As IV rises, delta increases, so market makers sell the underlying to stay delta-neutral → can dampen upward moves or exacerbate downward moves
• Negative Vanna: As IV rises, delta decreases, so market makers buy the underlying.

Key Concepts

• Volatility Stabilization: Heavy negative vanna can lead to buying flows during IV spikes, providing support in a declining market.

What is Charm?

Charm, also known as delta decay, measures how much an option’s delta changes as time passes. It’s a second-order Greek that becomes critical near expiration, especially for options near the at-the-money (ATM) strike

Why Should I Care?

Charm creates predictable, scheduled flows, especially noticeable into Friday option expirations or during large open interest weeks. It helps explain why markets drift in certain directions without news.

How Market Makers Hedge (And Why It Moves Prices)

Market makers hedge delta exposure, and as delta decays, they must adjust their stock positions daily.

Negative net charm means MM deltas decrease. This means the must re-hedge by buy shares to remain delta-neutral.

Key Concepts

• Charm builds pressure quietly. It's not event-driven — it's clock-driven.