Charm
Charm (also called delta decay) measures how delta changes as time passes, with spot and vol held constant.
Interactive Charm Curve
Explore how charm varies across spot prices. See how delta drifts toward its terminal value (0 or 1) as time passes.
Option Type:
Days to Expiry30d
1d90d
Implied Volatility50%
10%150%
Charm measures how delta changes as time passes. OTM calls lose delta over time (drift toward 0). ITM calls gain delta (drift toward 1).
Delta
+0.54
Charm/day
-0.0007
Delta Drift
stable
Weekend Δ
+0.002
Charm = -0.0007/day → Delta drifts stable by ~0.0007 per day.
Key Properties
OTM options: Delta drifts toward 0
ITM options: Delta drifts toward ±1
Accelerates: Near expiry
Delta Drift by Position
Why Charm Matters
Weekend Risk
~3 days of drift
- Friday → Monday = ~3 days of charm
- OTM options lose delta over weekend
- ITM options gain delta toward ±1
- Adjust hedges before weekends
Near-Expiry Effects
Charm accelerates
- Charm increases dramatically
- OTM: delta collapses toward 0
- ITM: delta snaps to ±1
- Pin risk at strikes with OI
💡
Even without any price movement, your delta exposure changes every day. This is charm. Near expiry, charm accelerates — OTM options rapidly lose delta while ITM options rapidly approach their terminal delta.
Charm vs Theta
Both relate to time passing, but measure different effects:
They're mathematically related: Charm = −∂Theta/∂Spot
Practical Applications
Hedging Implications
Charm contributes to delta hedge maintenance costs:
More frequent hedging: Higher transaction costs
Less frequent hedging: More drift risk
Near expiry: Charm overwhelms other factors
Related: