The Vanna Chart model depicts the estimated delta hedging requirements for market makers options positions. The model shifts the S&P500 price as well as implied volatility. Therefore it includes “Vanna,” which is the change in options delta for a given change in implied volatility (green line). We also adjust for time by forecasting how hedging requirements change after the next expiration in SPX options (black line). This “Next Expiration” figure incorporates “Charm” which is the change in hedging requirements for a given change in time.  

The more positive the delta notional is, the more futures dealers may have to sell to offset their options long delta exposure. If the delta notional is anticipated to reduce, or shift lower, it implies that dealers may have to buy futures When there are large shifts in hedging expectations it may show areas of resistance (when the delta notional moves higher) or support (when the delta notional moves lower).

Subscribers can access SpotGamma's Vanna Charts here.