Vanna and charm flows
Vanna and charm flows are the hedge adjustments a delta-neutral option book would need when implied volatility changes (vanna) or when time passes (charm), with the underlying price unchanged. They are modelled quantities that depend on a positioning assumption, and are often cited to explain drifts around expiries and volatility events.
Senzoukria · Glossary · Updated September 2026
At a glance
- Vanna flow
- Delta change per volatility point × open interest × multiplier
- Charm flow
- Delta change per day × open interest × multiplier
- Status
- Modelled, conditional on who holds the options
Why a hedge moves without price moving
A delta-neutral book holds an offsetting position in the underlying equal to its options' delta. That delta depends on spot, time and implied volatility. When implied volatility falls, out-of-the-money deltas shrink; when a day passes, they shrink as well. The hedge that was correct yesterday is then too large, and a hedger that stays neutral must trade. Vanna measures the volatility part, charm the time part; multiplied by open interest they become flows in shares or dollars.
Worked examples
Take 10,000 open calls struck at 105 on an underlying at 100, 30 days to expiry, 20% implied volatility. Each call's delta rises by 0.0125 per volatility point, so the series' delta changes by 12,500 shares, about 1.25 million dollars, per point. If implied volatility falls three points, a holder of these calls who is delta-hedged with short shares is over-hedged by about 37,500 shares and would buy them back.
Now take the same calls with 10 days left. Their delta decays by about 0.010 per day, so the series loses roughly 10,300 share-equivalents of delta a day, about 1 million dollars, with no change in price or volatility. A hedged holder buys back that amount of its short hedge each day.
The expiry narrative and what it assumes
- The common story: if dealers are net long calls and net short puts, both falling implied volatility and passing time reduce the delta they are hedged against, so they buy back hedges, which supports prices into large expiries.
- It assumes a dealer position that open interest does not reveal, that dealers hedge in the underlying or its futures, and that no other flow dominates.
- After expiry the expiring options stop contributing, which is the basis of claims that price behaviour changes once a large expiry has passed.
- These are testable hypotheses: record the modelled flow before the session and compare with what the tape did, including the days it failed.
In Senzoukria
No chain provider publishes vanna or charm, so the GEX module derives them from each leg's gamma, spot, strike, implied volatility and time to the 16:00 New York close of its expiry, with an assumed fixed rate and zero dividend yield. It scales vanna as OI × vanna × 100 × spot × 0.01, in dollars of delta per volatility point, and charm as OI × charm × 100 × spot ÷ 365, in dollars of delta per day, with calls added and puts subtracted as for gamma. The overview's Vanna exposure and Charm exposure tiles, the per-strike values and the Surface page use these figures, and a coverage count states how many legs entered them.
Related
In the same section
- Vega exposure
- Variance swap
- Variation margin
- Value migration
- Vega
- Value at risk
- Value area low
- Velocity logic
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Frequently asked questions
- Are vanna and charm flows visible on the futures tape?
- Not as labelled trades. A hedge adjustment may be executed in futures, ETFs, other options or netted inside a larger book, and it looks like any other order. The tape can only show whether buying or selling appeared around the time the model expected it.
- Why are these flows said to be strongest before monthly expiries?
- Because charm grows as expiry approaches and large monthly series concentrate open interest, so the modelled daily adjustment is largest in the final days. That is a property of the model; whether markets respond is an empirical question.