Most traders know delta and gamma. Fewer know vanna and charm, but these two Greeks explain a lot of quiet drifts that otherwise look random.

Vanna: volatility moves delta

Vanna measures how an option's delta changes when implied volatility changes. When volatility falls, out-of-the-money puts lose delta. Dealers who are short those puts no longer need as much hedge, so they buy back futures.

That is why falling volatility can create a steady bid in the index, even without news.

Charm: time moves delta

Charm measures how delta changes as time passes. As expiration gets closer, out-of-the-money options lose delta every day. Dealers unwind hedges as that happens.

Charm flows are strongest in the days before a large expiration and in the afternoon of expiration day itself.

Putting them together

• Falling volatility plus approaching expiration often means supportive dealer flow.

• Rising volatility reverses it, and the unwind can add to selling pressure.

• These flows are slow. They shape the drift of the day, not the next five minutes.

How to use them

Check the trend in VIX and the calendar. If volatility is sliding into a big expiry, be careful shorting quiet pullbacks. If volatility is spiking after OPEX, expect less support.

Final episode next: OPEX week, and why the days around monthly expiration behave differently.