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Definition · updated 2026-10-21
Charm
Charm is how an option's delta changes with the passage of time alone. Out-of-the-money options lose delta each day, so dealers hedging them unwind stock steadily into expiration, a flow that is strongest in the last days before monthly OPEX and is one reason markets drift in the week before it.
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Charm acts in the same direction every day as expiration approaches, while gamma acts on each move. Together they explain the pin: charm bleeds the hedges away, gamma pulls price toward the heavy strikes.
Frequently asked questions
- When does charm matter most?
- The last week before a large expiration, when the most open interest is decaying at once.
- Charm versus theta?
- Theta is the price decaying with time; charm is the delta decaying with time. Theta is what you pay; charm is what the dealer has to re-hedge.