DEFINITION of 'Charm'
The rate at which the delta of an option or warrant will change over time. Charm refers to the second order derivative of an option's value  once to time and once to the price. It is also the derivative of theta, which measures the time decay of an option's value. This value decreases as the option approaches maturity.
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BREAKING DOWN 'Charm'
Charm is used by investors who employ a deltahedging option trading strategy, and provides the investor with information on the delta of an option on a peryear basis. As the number of days left on the options contract gets smaller and smaller, charm becomes more volatile and less accurate.
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