Charm
The Greek measuring how an option's delta decays with time — driving the systematic 'pin to strike' effect near expiry.
Definition
Charm = ∂Delta/∂Time. As expiry approaches, OTM option deltas decay toward 0 and ITM deltas decay toward 1 (or -1). Dealers hedging short option positions therefore unwind delta hedges as expiry approaches, generating predictable flows.
Charm is the technical reason indices often 'pin to strike' on monthly OpEx Fridays.
Public research record
Research framework · page evidenceCompleted application: Charm
Charm flows are mechanically predictable and represent measurable cross-section of OpEx Friday price action.
| Type | Claim | Scope |
|---|---|---|
| Release fact | The Greek measuring how an option's delta decays with time — driving the systematic 'pin to strike' effect near expiry. | Options |
| Release fact | Friday before December 2023 OpEx: SPX pinned within 15 points of 4,700 strike for most of the session as dealer charm flows unwound around concentrated open interest. | Published example |
Countercase, invalidators, and sources
The relationship is conditional: another driver can dominate the same asset over the selected horizon.
- · The underlying observation changes materially.
- · The selected asset has no measurable exposure to this mechanism.
Why it matters
Charm flows are mechanically predictable and represent measurable cross-section of OpEx Friday price action.
Worked example
Friday before December 2023 OpEx: SPX pinned within 15 points of 4,700 strike for most of the session as dealer charm flows unwound around concentrated open interest.