Hermēs DocumentationVanna & Charm
When IV moves and time passes, a dealer's delta drifts on its own, forcing price-independent hedging flow — the mechanism behind the afternoon lift and the closing magnet, and how to read it on the Greek Flow page.
One-line positioning
Gamma is about "how dealers hedge when price moves." But a dealer's delta drifts even when price doesn't — IV moves (vanna), time passes (charm). The hedging flow that drift forces is the mechanistic source of the afternoon lift and the closing magnet.
Mantra (matching the Greek Flow page):
IV compresses → vanna bullish regime → dealers buy back longs → upside tailwind. IV expands → vanna bearish regime → delta selling → resistance. Near the close → charm magnetism strengthens → price pulled toward the large open-interest strike.
Section 1: Two second-order Greeks, in plain words
| What it measures | Trigger | Flow it forces | |
|---|---|---|---|
| Vanna | delta's sensitivity to IV | IV changes (price can stand still) | IV compresses → buying; IV expands → selling |
| Charm | delta's sensitivity to time | Time passing (fiercer near expiry) | Pulls price toward the large OI strike (magnet / pin) |
Key insight: first-order (delta/gamma) watches price; second-order (vanna/charm) watches volatility and time. During a session price may sit flat, but IV is falling and time is passing — those two axes still force dealers to buy and sell. Watch price alone and you'll think "no one's moving," while flow runs underneath.
Section 2: Vanna — the mechanism of the afternoon lift
IV falls (market calms down)
→ the dealer's positions (e.g. short puts) have delta pushed toward buying
→ they must buy the underlying/futures to hedge
→ price is propped up by that mechanical buying = "vanna rally / afternoon lift"- It is not someone turning bullish — it's forced buying from IV compression.
- Common window: when morning fear-pricing fades and afternoon IV grinds lower.
- Reverse holds too: IV expanding (fear rising) → vanna bearish → forced selling → upside becomes resistance.
Section 3: Charm — the closing magnet and expiration pin
Time passes (especially the close / expiration day)
→ option deltas accelerate toward 0 (OTM) or 1 (ITM)
→ the net effect of dealers re-hedging = pulling price toward the large OI strike
→ price gets "pinned" near the max OI = "EOD magnet / OPEX pin"- Stronger the closer to the bell, fiercest on expiration (especially 0DTE / OPEX).
- This is why on many days the tape "mysteriously" hugs a round number into the close — the max-OI strike is pulling it.
Vanna governs "which direction it drifts," charm governs "which level it pins to." Afternoons are often both stacked: vanna gives an upside tailwind, charm pins the landing toward the big-OI strike.
Section 4: 👀 Where to see it in HermesGEX (Greek Flow page, Ultra)
Greek Flow (/greek-flow, also folded into the Options Desk) is built precisely to read these two axes:
| What you want | Where | How to read it |
|---|---|---|
| Vanna / charm current direction & strength | Greek Flow · Regime Cards | Gives "vanna bullish/bearish regime" and "charm magnet strength" directly |
| Whether pressure sits on today or tomorrow | Greek Flow · 0DTE vs 1DTE split | Two columns to see which expiry holds the dealer pressure |
| What the current combo is | Greek Flow · 2×2 quadrant | Vanna×Charm lands on: tailwind lift / headwind pressure / accelerating down / quiet |
| Which level it pins into the close | Greek Flow · EOD Magnet Clock | Countdown + current strongest magnet strike |
| Whether vanna is firing intraday | Insight Rail · Vanna Heat card | Lit = IV-compression buying is accumulating |
Three steps in practice:
- Intraday, check the Greek Flow Regime Cards first to set the vanna / charm direction.
- Use the 2×2 quadrant to characterize it — when it lands on "tailwind lift," dips are more likely to be bought.
- Into the close, switch to the EOD Magnet Clock and line up the magnet strike against your position's target.
Section 5: Two traps
1. Vanna flow needs IV to actually move. When IV sits flat there's no vanna lift to speak of — don't hallucinate an ordinary chop into a vanna rally.
2. Charm magnetism gets broken by macro shocks. A CPI / FOMC print sends price flying off the magnet strike, voiding the pin. The magnet is a "calm-day close" mechanism, not an iron law.
Next steps
Vanna/charm are second-order flows under normal conditions. The next chapter looks at an abnormal one: when retail abnormally chases calls, second-order flow is pushed to an extreme and turns into a gamma squeeze.
Chapter mantra: first-order watches price, second-order watches vol and time; IV compresses → vanna buying lifts the tape; near the close → charm pins price to the big OI; read the Greek Flow Regime Cards + 2×2 quadrant + Magnet Clock end to end.
Frequently asked questions
What exactly are vanna and charm?
They are second-order Greeks describing how a dealer's delta drifts even when price doesn't move. Vanna is delta's sensitivity to implied volatility — IV changes, delta changes, hedging is forced. Charm is delta's sensitivity to time — time passes (especially near expiration), delta drifts, hedging is forced. Both create buy/sell flow that has nothing to do with price moving.
Why does the tape often drift up in the afternoon for no reason?
That's a classic vanna flow. If intraday IV grinds lower, the dealer's hedging delta is pushed toward buying, producing the "afternoon lift." It isn't someone turning bullish — it's mechanical buying forced by IV compression. HermesGEX's Greek Flow classifies it as a vanna bullish regime.
What's happening when price gets "pulled" toward a level into the close?
Charm magnetism. As the close approaches, option deltas accelerate toward 0 or 1, and the net effect of dealers re-hedging pulls price toward the large open-interest strike. HermesGEX's EOD Magnet Clock shows the countdown and the current strongest magnet strike.
Volatility Skew
Why IV differs across strikes at the same expiry — why puts cost more than calls, what steepening/flattening means, and how to read it with the C/P Skew card in HermesGEX.
Anatomy of a Gamma Squeeze
Break the "dealers forced to chase" feedback loop into pre-conditions and how it ends — no predicting which name pops, just the mechanistic checklist for a squeeze, and which HermesGEX cards flag it early.