Color
Canonical definition, formula, interpretation, and API reference.
Definition
How gamma changes with time - gamma's time decay. Measures how the gamma of an option shifts as one day passes.
Formula
Color = dGamma/dTime
Third-order partial derivative of option value with respect to spot (twice) and time.
Inputs
gammatime to expiryspotIV
Output
color value (per day)
Interpretation
- Negative color (typical): gamma decreases with time for ATM options
- Important for understanding overnight gamma exposure shifts
- Gamma equivalent of charm
API Reference
Endpoint
GET /v1/pricing/greeks
Tier
Free
Response field
third_order.color
Why Color Matters for Trading
TL;DR
Color tells you how fast gamma decays through time. Strongest on 0DTE - it's why pin forces intensify into the final hours.
- What it measures
- ∂Γ/∂t - rate of change of gamma with respect to time.
- What it signals
- The speed at which your convexity decays.
- Why we measure it
- Gamma grows into expiry. The speed of that growth - which strike, which tenor - is color's job.
- Who uses it
- 0DTE traders, OPEX specialists, gamma scalpers.
How to read Color
Large positive color
- Gamma building fast
- Strong intraday pin forces
- Late-session convexity
- Reinforces max pain
Good for: pin plays into close
Large negative color
- Gamma decaying fast
- Pin forces releasing
- Often precedes regime transition
- Mid-day OPEX dynamics
Bad for: pin plays, stable
Non-expiry / far from expiry
- Color is background noise
- Gamma stable
- No intraday acceleration
- Normal trading regime
Flat
Rules of thumb
- Concentrates on expiry day. Non-expiry color is negligible. OPEX Thursday/Friday = peak color.
- Watch the last hour. Color's effect compounds into the close as T approaches zero.
- Pair with gamma acceleration. Color is the per-strike version; gamma acceleration is the chain-wide ratio.
- Index ETFs only. Color matters where 0DTE markets are active - SPX, SPY, QQQ.
- Quant-managed. Retail manages color implicitly through DTE selection.
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