Market Movements

^{*Weekly Return is calculated as market open of the previous Wednesday, to market close this Tuesday (yesterday); Current Level is Tuesday’s (yesterday’s) close.}

Weekly Rollout

• The market continues to ebb and flow

• Volatility is coming mostly from the usual headlines

• What is Schwab saying about the options market?

• Is there a circumstance where rates increase?

• There is a ~10% chance of a rate hike next meeting

• Here is a solid look at some Greeks used for hedging

“Good-To-Know’s”

Doing something immediately feels better than doing nothing. It feels like progress.

This can make it hard for us to allow time to do its thing.

For me, I just reframe it. Patience/Waiting is actually doing something.

We are progressing by letting time do its thing. We are actively doing the necessary waiting.

Give theta room to breathe.

Quote(s) I Like

Thought Throttle

Most traders see delta as a fixed number.

It feels reliable. But here’s what many miss—delta is never frozen. It shifts every day, even if the stock price stays completely flat.

But First… What is Delta?

Delta is our real-time exposure meter. It tells us how much your option should gain or lose for every $1 move in the underlying, ranging from -1.0 to +1.0.

A common mistake? Thinking delta only changes when the stock price moves. That’s called gamma, a very important Greek to know. But, it’s one for another day.

Price isn’t the only force acting on delta. Our positions at expiration look different than at entry, and not just because of price action or volatility.

Why Else Does Delta Change?

Imagine a sideways stock. Even if nothing dramatic happens, the option’s delta does not remain the same.

Why? As days pass, the odds of where the stock will finish at expiration slowly compress. This nudges how sensitive (or insensitive) the option is to future movements.

This gives rise to a subtle but powerful Greek that desks monitor closely—especially when managing large, hedged books.

What is This Greek?

It is Charm and it measures how much an option’s delta changes each day purely from the passage of time, all else equal.

In everyday terms, it’s the daily “drift” in our directional exposure.

A charm value might look like -0.003 or +0.04 per day.

If charm is -0.003 and our current delta is 0.25, after 3-4 flat days, delta may still fall to ~0.24.

It’s not huge on any single day, but it certainly adds up.

And it forces market makers to adjust their stock hedges daily (especially over weekends) to stay neutral. Those quiet flows matter more than most realize.

We can also see how charm acts based on moneyness.

Positive charm (common for ITM calls and OTM puts): Deep ITM calls drift toward +1.0 delta (more directional exposure). OTM puts drift toward 0 delta (less negative, less directionally exposed).

Negative charm (common for OTM calls and ITM puts): OTM calls lose positive sensitivity fast (less directional exposure). ITM puts become more negative (closer to -1 delta; more directional exposure).

Out-of-the-money options usually see stronger charm effects than at-the-money ones, which tend to cling to their current delta longer.

The closer you get to expiration, the more pronounced this phenomenon becomes.

So, Why Should We Care About Charm?

If you sell options, charm is often your quiet ally.

Sell a 30-delta put in a flat market. Most traders assume nothing is changing.

But charm is at work, causing the OTM put’s delta to slowly drift toward zero, even if the stock stays flat.

In no time, there is noticeably less directional risk. We’re not managing the same trade anymore.

Here are some keys to why charm is important:

• Delta Hedging: Helps dealers predict daily (and weekend) delta drift for cleaner, more efficient rebalancing.

• Weekend Effect: Explains Monday gaps, as charm keeps working while markets are closed.

• Position Management: Lets short-premium traders pick strikes where charm reduces directional exposure faster, making trades safer as expiration nears.

Delta isn’t a static label, but a living number, constantly being acted on by price, volatility, and time. Charm is simply the time piece most traders never notice.

Thank you for reading.

Trade Mechanics

Let’s look at an opportunity for a cash-secured put in Palantir Technologies Inc. (PLTR).

The strike below represents roughly a ~28-delta put expiring 15 May 2026.

Selling the $140 15 May 2026 Put for ~$7.45 in premium offers a 5.62% return on risk over 52 days and a ~14.4% discount on the current price if assigned.

This roughly -28 delta put carries a small positive charm of +0.0012 per day, meaning its delta slowly moves toward 0 (less directional exposure), quietly improving the short position even if PLTR stays flat.

If the stock stays above $140 at expiration, we keep the full premium as income. If assigned, our effective cost basis drops to $132.55.

This is for educational purposes only—not a trade recommendation. Remember to always do your own due diligence and consult a financial advisor before making investment decisions.

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Disclaimer

The information provided in this newsletter is sourced from reliable channels; however, we cannot guarantee its accuracy. The opinions expressed in this newsletter are solely those of the editorial team, contributors, or third-party sources and may change without prior notice. These views do not necessarily reflect those of the firm as a whole. The content may become outdated, and there is no obligation to update it.

This newsletter is for informational purposes only and does not constitute personal investment advice. It is not intended to address your specific financial situation and should not be construed as legal, financial, tax, or accounting advice, or as a recommendation to buy, sell, or hold any securities. No recommendation is made regarding the suitability of any investment for a particular individual or group. Past performance is not indicative of future results.

Options come with inherent risks. We strongly advise you to consult with a financial advisor before making any investment decisions, including determining whether any proposed investment aligns with your personal financial needs.