Mastering Second-Order Greeks: Vanna and Charm Exposure
Learn how Implied Volatility decay (Vanna) and time decay (Charm) force automatic dealer buying before major macroeconomic events.
Beyond Delta and Gamma: Second-Order Greeks
While Delta and Gamma measure price sensitivities, high-level option desks rely on second-order Greeks to anticipate multi-day structural rallies during FOMC rate decisions and CPI data releases.
1. Vanna Exposure (IV Sensitivity)
Vanna measures the rate of change of Delta relative to changes in Implied Volatility (IV). When IV drops (such as after an earnings announcement or Fed release), long call deltas increase, forcing dealers to buy underlying stock to stay delta-neutral. This is known as a Vanna Rally.
2. Charm Exposure (Time Decay Sensitivity)
Charm measures the rate of change of Delta as time to expiration approaches. Leading into Friday contract expirations, Charm decay forces continuous automated rehedging from market maker algorithms.
Track Dealer Positioning in Real Time
Stop trading blind. Access live Call Walls, Put Walls, Volatility Triggers, and sub-second HIRO order flow across 3,500+ equities instantly inside the GEXLogic Terminal.