Charm
Canonical definition, formula, interpretation, and API reference.
Definition
The rate at which delta changes with time. The greek behind CHEX. Drives end-of-day dealer rebalancing.
Formula
Charm = dDelta/dTime
Second-order cross-partial of option value with respect to spot and time.
Inputs
deltatime to expiryspotIV
Output
charm value (per day)
Interpretation
- Positive charm: time decay pushes delta toward zero
- Drives end-of-day dealer rebalancing flows
- Core input for CHEX (Charm Exposure) calculations
API Reference
Endpoint
GET /v1/pricing/greeks
Tier
Free
Response field
second_order.charm
Why Charm Matters for Trading
TL;DR
Charm is delta decay over time. It's why dealer flows concentrate into the last hour of OPEX week - charm is the flow scheduler.
- What it measures
- ∂Δ/∂t - how delta changes purely from the passage of time, all else equal.
- What it signals
- Predictable time-driven hedging flow. Most visible Thu-Fri of OPEX week.
- Why we measure it
- Most hedging flow is price- or vol-driven. Charm is time-driven, which makes it the rare flow you can predict without a signal.
- Who uses it
- 0DTE traders, OPEX specialists, intraday flow quants.
How to read Charm
Positive chain charm
- Dealers buy into EOD
- Supports late-session rallies
- Peaks on OPEX Thu/Fri
- Reinforces pins
Good for: late-day longs
Negative chain charm
- Dealers sell into EOD
- Pressure on closes
- Common after large call-OI
- Fade-rally setups
Good for: intraday shorts
Low charm (midweek, far from OPEX)
- Time-decay flow minimal
- Normal hedging regime
- No charm edge
- Trade on other factors
Off-peak
Rules of thumb
- Charm blows up into expiry. ∂Δ/∂t grows as T→0. 0DTE charm is an order of magnitude larger than 7DTE.
- Check CHEX for aggregate. CHEX is chain-wide charm exposure - the number traders actually use.
- Weekends carry charm. Fri → Mon = 3 calendar days of delta drift. Monday open reflects it.
- Concentrates in last 60 minutes. Charm flow mostly hits the closing auction.
- Pair with OI concentration. Large charm + dense OI = strong intraday pin.
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