Charm
Charm (CHEX) shows how dealer delta shifts as time passes.
What charm shows
Charm is how dealer delta shifts as time passes, with price and volatility unchanged. It is the clock's effect on hedging.
An option can call for a different hedge later even if the stock hardly moved. The direction depends on the contract and the conditions. There is no rule that the passage of time always creates buying or always creates selling.
When it matters
Charm matters most when the clock is doing the work.
- Into the close
- On expiry days
- In 0DTE afternoons
The Charm map
- Reads
- Dealer charm at each strike, in dollars: roughly how much the directional hedge drifts as time passes, with price and volatility unchanged.
- Positive means
- As time passes, hedging there tends to reinforce the level, like a wall or cushion.
- Negative means
- As time passes, hedging there tends to add fuel.
- Useful when
- Into the close, on expiry days and in 0DTE afternoons.
- Watch for
- Large charm near spot late on expiry day.
Into expiry
As expiry nears, an option close to price turns into an all-or-nothing bet: its delta swings from near zero to near one over a narrow band of prices. That sharpness is gamma, and it concentrates at the strikes nearest price. The same contracts then call for bigger hedge changes for the same price move, so levels near price grow and distant ones fade.
Out-of-the-money options lose delta as the day runs down, and in-the-money options gain it. So the hedge drifts even when price does not move, and late in the day it drifts fast. Read the sign on the Charm map rather than guessing its direction.
A negative level means hedging leans with the move. Into expiry that lean gets stronger: a small push can need a large hedge, and the hedge adds to the push. Both end when the contracts expire.
Before comparing two numbers
Some sources use time remaining until expiry instead, which can flip the sign of the same effect. Also check whether a value is per day or per year. Before comparing two charm numbers, settle the direction of time and the unit.