Vanna and charm are second-order Greeks. Vanna is how an option's delta changes when implied volatility changes; charm is how delta changes as one day passes with everything else unchanged. Dealers who hedge large option books have to re-hedge when either moves, so vanna flows show up around volatility events and charm flows into expiration, while GEX covers the third driver, price. QuantWheel shows vanna and charm for any ticker in the free Vanna & Charm Exposure Heatmap and, inside the app, in GEX AI.
Before you start
Required:
- Nothing for the free heatmap: open the Vanna & Charm Exposure Heatmap, enter a ticker, pick the expirations and select Generate.
- For the GEX AI charts and key levels inside the app, the GEX plan or above.
- Familiarity with GEX. See Understanding GEX and How to use GEX AI for a ticker first. Vanna and charm build on GEX concepts, and how options Greeks work covers the first-order Greeks underneath.
Time to complete: 8 minutes
Where to find them
Free, without an account: the Vanna & Charm Exposure Heatmap shows net vanna and net charm by strike and expiration for any ticker, with the vanna flip and the net vanna regime beside the grid, and the heatmaps by ticker list the most searched names. Inside the app, vanna and charm live in the GEX AI tab on the left. Select "Vanna & Charm", enter the ticker, choose the expiration and select Search. The next screenshot shows the result.
The section includes four charts plus in-UI explainer boxes labeled "What is Vanna?" and "What is Charm?" - small educational callouts for quick reference.
What Vanna is
Vanna is the rate at which an option's delta changes when implied volatility changes. In dealer-positioning terms:
- If a dealer is short a call option and implied volatility rises, their effective delta on that position changes (typically becomes more negative)
- To stay hedged, the dealer must sell more of the underlying
- Across a large book of options, this volatility-driven hedging can move prices meaningfully
When Vanna matters
- During IV expansion (volatility spikes): dealer Vanna positioning becomes a significant flow. Stocks can move more than "news warrants" because of hedging cascades.
- During IV crush (post-earnings, post-FOMC): the reverse flow - dealer hedging as IV collapses often stabilizes or even reverses moves.
- In persistent low-vol regimes: Vanna effects are quiet and GEX dominates.
Positive and negative vanna, what happens to price
With positive net vanna, dealers sell as implied volatility rises and buy as it falls. Implied volatility usually rises when price falls and falls when price rises, so a drop and a rally both get pushed further. With negative net vanna the hedging runs the other way, dealers buy as implied volatility rises and sell as it falls, so both moves are damped. GEX AI states the regime (positive or negative) for the NOW and REGIME tenors and marks the vanna flip, the spot level where the sign would change.
The two Vanna charts
QuantWheel typically displays two Vanna views:
- Net Vanna Exposure - total dealer Vanna across strikes and expirations, as a single line over time or a single summary number
- Vanna Exposure (Call/Put) - split into call-side Vanna and put-side Vanna, so you can see which side of the book is driving the exposure
What Charm is
Charm is the rate at which an option's delta changes as time passes (holding everything else constant). In dealer-positioning terms:
- Options decay toward expiration. Their delta drifts - out-of-the-money options drift toward 0 delta, in-the-money options drift toward 1 (or -1) delta.
- Dealers need to adjust their stock hedge every day just to account for this time-driven delta drift.
- The cumulative dealer flow from Charm is typically called "Charm flows" and is most significant near expiration.
When Charm matters
- The last week before a major expiration (OPEX Friday): Charm flows concentrate as delta drift accelerates
- Overnight and into Monday mornings: weekend-and-weekday Charm flows are consistent even without news
- The last hour of expiration day: Charm can dominate all other flows
- Zero-day contracts: with hours left, charm on the day's expiring strikes can pin price near a heavy strike or drift it, which is why the charm grid is brightest in the nearest column
The two Charm charts
- Net Charm Exposure - total dealer Charm flow, typically across the full book
- Charm Exposure (Call/Put) - split by call-side vs. put-side, useful for spotting asymmetric positioning
How vanna exposure is calculated
Per contract, vanna is approximated from the chain's Greeks (gamma times vega, divided by the absolute delta), multiplied by open interest and the 100-share contract size, and netted calls against puts at each strike and expiration. Charm is approximated from theta and gamma the same way and scaled to one day. The free heatmap and GEX AI use the same model of the listed book; neither observes dealer inventory, and neither says which way price goes.
Gamma, vanna and charm side by side
| Driver | What forces the re-hedging | When it matters most | Where to read it |
|---|---|---|---|
| Gamma (GEX) | a change in price | trending sessions, moves through the walls or the gamma flip | GEX AI, the GEX heatmap |
| Vanna | a change in implied volatility | FOMC, CPI, earnings, IV crush, overnight IV moves | GEX AI, the vanna heatmap |
| Charm | the passage of time | expiration week, zero-day contracts, the last hour of expiration day | GEX AI, the charm heatmap |
How to use Vanna and Charm
For volatility-event trading
Before and during FOMC, CPI, earnings, and similar IV-sensitive events, check Vanna. If the ticker carries large positive Vanna at current strikes, IV spike could trigger significant dealer selling (flow accelerates downside). If negative Vanna, the spike could trigger dealer buying instead.
This is one of the harder GEX concepts to internalize but one of the most useful for event traders.
For expiration-week trading
In the week before OPEX, Charm becomes a meaningful flow. Large positive net Charm in the book suggests dealers need to sell stock daily just to stay hedged; large negative suggests the reverse. This can produce systematic morning flows in the days leading up to expiration.
Pair with Max Pain for the complete expiration-week picture. See How to find max pain strikes.
For overnight gap dynamics
Pre-market gaps on major indices often involve Vanna flow from overnight IV changes (e.g., Asian or European session moves). Tickers with big Vanna exposure can see amplified gap continuations or reversals at the US open.
Not for day-trading most tickers
Most non-event trading days, Vanna and Charm flows are small relative to GEX. Checking them daily for every ticker is overkill. Check them when conditions call for it: around scheduled events, during IV regime changes, and in expiration week.
Common misconceptions
"Vanna and Charm are just smaller versions of GEX."
They're different flow types. GEX responds to price moves. Vanna responds to IV moves. Charm responds to time passing. All three run on different schedules and matter in different conditions.
"These are too advanced to use."
The ideas are conceptually dense, but the practical application is simple: "Check Vanna before IV events. Check Charm in expiration week. Ignore otherwise." Most trading days, GEX alone is the primary GEX-suite signal.
"The Vanna number tells me which way to trade."
Like GEX, Vanna describes dealer positioning, not direction. High positive Vanna tells you dealers will sell more if IV rises - it doesn't tell you whether IV will rise. Combine with your own view on the event.
"Charm always supports mean reversion into expiration."
Sometimes yes, sometimes no. Direction depends on which side of the book Charm flow concentrates on. Read the call-side vs. put-side Charm split, not just net Charm.
Related
- Vanna & Charm Exposure Heatmap, free, any ticker
- Vanna and charm heatmaps by ticker
- Understanding GEX and what it tells you
- How to use GEX AI for a ticker
- How to find max pain strikes
Risk disclaimer: Options trading involves substantial risk of loss and is not suitable for all investors. Past performance does not guarantee future results. This content is for educational purposes only and is not investment advice.