What Is Charm in Options?
Charm (also called delta decay or DdeltaDtime) measures how much an option's delta changes as one day passes, with the stock price and volatility unchanged. It's a second-order Greek—it describes how a first-order Greek (delta) evolves over time.
If your call option has a delta of 0.45 today and charm of -0.01, tomorrow your delta will be approximately 0.44, even if the stock doesn't move at all.
Why Charm Matters
Most traders are surprised when their position delta changes overnight despite no stock movement. Charm is the explanation.
Example: You sold a put spread on SPY with a total position delta of -15 at entry. Over the next week, the stock doesn't move, but your position delta drifts to -8. You didn't touch anything—charm did it. The short OTM put's delta shrank as expiration got closer because the probability of the stock reaching that strike decreased with less time remaining.
For traders who delta hedge, charm represents a "phantom" delta change that requires rebalancing even in quiet markets. You might need to adjust your hedge every day purely because of time passing.
How Charm Behaves
Charm's behavior depends on moneyness:
OTM options: Charm is negative for OTM calls and positive for OTM puts. As time passes, OTM options become less likely to finish ITM, so their delta magnitude decreases. An OTM call with 0.30 delta drifts toward 0.25, then 0.20, as days pass.
ITM options: Charm is positive for ITM calls and negative for ITM puts. As time passes, ITM options become more likely to stay ITM, so their delta magnitude increases. An ITM call with 0.70 delta drifts toward 0.75, then 0.80.
ATM options: Charm is near zero because ATM delta stays around 0.50 regardless of time. The option is always a coin flip at the money.
| Moneyness | Call Charm | Put Charm | Delta Direction |
Charm Accelerates Near Expiration
Like most Greeks, charm intensifies as expiration approaches. In the last week, OTM option deltas collapse quickly—not because the stock moved, but because time ran out.
A 0.20 delta option with 30 DTE might have charm of -0.002 (delta barely changes day to day). That same option at 5 DTE might have charm of -0.015 (delta dropping by 0.015 per day). In the last 5 days, charm could shift your delta by 0.075, which is material for hedged positions.
Practical Applications
Weekend delta drift: You close Friday with a specific delta. Over the weekend, two days of charm apply. Monday morning, your delta has shifted—potentially by a meaningful amount if you're close to expiration. This catches many traders off guard who set up weekend positions based on Friday's delta.
Covered call management: You sold a 0.30 delta covered call three weeks ago. The stock hasn't moved, but charm has reduced the call's delta to 0.18. Your position is now more bullish than at entry because the short call is providing less offset. You might want to roll the call closer to collect fresh premium.
Spread management: Credit spreads that are OTM benefit from charm. The short option's delta decreases faster than the long option's delta (the short is closer to ATM), naturally reducing your net delta exposure over time. This is a hidden benefit of patiently holding winning spreads.
Charm vs. Gamma
Gamma tells you how delta changes with stock movement. Charm tells you how delta changes with time. Both are "delta change" metrics, but they respond to different inputs.
A position with zero gamma can still see delta drift if it has non-zero charm. Conversely, gamma might shift your delta intraday while charm does its work overnight.
For delta-hedged portfolios, you need to account for both:
Should You Trade Around Charm?
Most retail traders don't need to explicitly calculate charm. But understanding it explains behavior you'd otherwise find confusing:
OptionsPilot displays real-time Greeks including second-order measures, helping you anticipate how your portfolio delta will evolve day to day without manual Greek calculations.