Charm (Delta Decay)

Charm is the rate at which an option's delta changes as time passes, holding price constant. Because charm steadily shifts dealers' hedges as expiration approaches, it produces predictable, time-of-day hedging flows - often visible into the close and into Friday expirations.

Also called delta decay, charm captures how an option's directional exposure drifts simply because time is passing. For dealers hedging a large book, charm means their required hedge changes even when price is flat, so they must trade the underlying on a schedule set by the calendar and clock.

This is why certain flows cluster at predictable times: as expiration nears, charm accelerates, and the associated hedging can add a persistent bid or offer into the afternoon and into expiration Fridays. Charm is one of the 'second-order' Greeks that helps explain structural, time-based flow rather than reaction to news.

Charm effects are tendencies estimated from positioning. They describe mechanics, not outcomes, and are context for reading flow - not a signal to act on.