Vanna
The second-order Greek measuring how an option's delta changes with implied volatility — a key driver of dealer hedging flows in vol regime shifts.
Definition
Vanna = ∂Delta/∂Vol = ∂Vega/∂Spot. When vol rises, OTM call deltas rise (they look more likely to expire in-the-money), so dealers short calls must buy more underlying. That's a vanna flow.
Vanna is the technical reason why falling VIX (a vol drop) can spark systematic equity buying — short-call dealers' deltas drop, triggering re-hedging into longs.
Why it matters
Vanna and charm flows explain much of the post-FOMC and end-of-quarter equity drift that fundamentals don't justify.
Worked example
Post-October 2022 CPI: VIX collapsed from 32 to 21 in a week. Vanna flows from short-vol dealer positions added an estimated ~$30B of S&P buying.
Frequently asked
Who tracks vanna flows?⌄
How does vanna interact with charm?⌄
Can vanna cause selloffs?⌄
Is it relevant to single-stock options?⌄
Related terms
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