Charm Decay

Delta changes caused by time passage

What is Charm Decay?

Charm Decay The practical effect of charm (delta decay) on options positions over time. As time passes, out-of-the-money options lose delta (move toward 0) while in-the-money options gain delta (move toward 1.0). This effect accelerates near expiration and drives significant hedging flows from market makers.

Complete Definition

The practical effect of charm (delta decay) on options positions over time. As time passes, out-of-the-money options lose delta (move toward 0) while in-the-money options gain delta (move toward 1.0). This effect accelerates near expiration and drives significant hedging flows from market makers.