Options Analytics
SPY Charm Exposure
Analyze how dealer delta hedging needs decay as time passes (Delta Bleed).
Net Charm Exposure
Aggregated call and put charm across strikes. Shows the daily drift in dealer delta positioning as time passes towards expiration.
Put & Call Charm Exposure
Breaks out charm by puts vs calls to see which side is experiencing the most time-decay in dealer delta.
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Understanding Charm Exposure
What is Charm?
Charm (often called Delta Decay) measures how sensitive an option's Delta is to the passage of time. As an option gets closer to expiration, out-of-the-money options lose their delta (it drops to 0), and in-the-money options gain delta (it approaches 1 or -1).
For dealers who are hedging options positions, this means their required hedges slowly bleed away each day. If dealers are broadly long puts (to hedge customer put buying), they start each day with a certain delta hedge. As time passes, the delta of those puts decays toward zero, meaning dealers must buy back underlying stock to neutralize their hedges. This phenomenon is often colloquially known as "charm flows".
Practical Applications
- Anticipate bullish dealer drift mechanically caused by the passage of time over weekends or holidays (the "weekend effect").
- Identify if market making positioning will slowly support the market over time.
- Combine with Gamma exposure to understand the dynamics of dealer positioning heading into Options Expiration (OpEx).